AVZ Minerals Ltd (ASX:AVZ) (OTCMKTS:AZZVF) (FRA:3A2) has secured a strategic, long-term offtake partner agreement with Yibin Tianyi Lithium Industry Co Ltd for the supply of spodumene concentrate (SC6) from the Manono Lithium and Tin Project in the DRC.
A major milestone has now been reached with more than 80% of annual SC6 production from the Manono Project committed under long-term binding offtake agreements, satisfying an important condition precedent for prospective project financiers.
Important condition precedent
AVZ managing director Nigel Ferguson said: “We are very pleased to conclude our discussions with Yibin Tianyi and to sign another binding offtake agreement for SC6 to a Chinese converter.
“This agreement takes our SC6 binding offtake commitments to more than 80% of the project’s annual SC6 production, which is a massive endorsement for the Manono Project and one that satisfies an important condition precedent for our prospective project financiers."
Buoyant market conditions
The MD said: “At present, we are seeing buoyant market conditions with reported SC6 prices in China increasing circa 30% in the first quarter of the year while during the same time the LME cash tin price has surged circa 30%, boding well for the Manono project’s optimised definitive feasibility study, which is due for completion next quarter.
“Positive market sentiment is greatly assisting our negotiations and while we are not compelled to commit to further forward sales, we are continuing to explore strategic opportunities for our offtakes in both traditional and emerging lithium markets including Europe, US and India.”
Key terms
Key terms of the Yibin Tianyi offtake agreement include:
- Initial three-year term, with an option to extend for an additional two years;
- Annual supply of 200,000 tonnes (+/- 12.5% in seller’s option) of spodumene concentrate per annum;
- Pricing USD/CIF, China determined by a formula, which references various published market prices of lithium carbonate and lithium hydroxide products and underpinned by an agreed floor price;
- Shipment payments via documentary letter of credit; and
- Termination rights included for breach of the material terms of the offtake agreement, including non-payment or failure to supply or take annual quantity commitments.
Yibin Tianyi
Yibin Tianyi is a leading global battery materials producer that is continuing to expand its lithium hydroxide production capacity as a key participant in the supply chain of Contemporary Amperex Technology (CATL), the world’s largest lithium-ion battery maker.
It is set to become one of the largest lithium hydroxide producers in China, with initial production capacity of up to 20,000 tonnes of lithium hydroxide per annum and with future staged expansions expected to increase production to around 100,000 tonnes per annum.
Yibin Tianyi will require around 700,000 tonnes per annum of SC6 to satisfy its internal demand after commissioning its planned hydroxide plant expansions.