Core Lithium Ltd (ASX:CXO) has passed another key milestone on its path to becoming Australia’s next lithium producer with a binding offtake agreement with a subsidiary of Jiangxi Ganfeng Lithium Co, Ltd now unconditional.
This follows Ganfeng receiving all necessary regulatory approvals in China.
The agreement is for the annual supply of 75,000 tonnes of Li2O spodumene concentrate per annum over four years from Core’s Finniss Project near Darwin in Australia’s Northern Territory.
Follows FID
It also includes an associated A$34 million equity issue and comes hot on the heels of Core’s board taking the Final Investment Decision to begin development of the wholly-owned project.
Core is fully funded for Finniss’ development through to first lithium concentrate production, which is scheduled for quarter four of 2022.
Shareholder and world-class customer
Core Lithium managing director Stephen Biggins said: “I am delighted that the conditions underlying Ganfeng’s offtake and equity investment have now been satisfied and I welcome Ganfeng as both a shareholder of Core and a world-class customer.
"We look forward to working closely with Ganfeng to deliver our Finniss Lithium Project.
“Following the Core board’s positive Financial Investment Decision for Finniss’, our focus now is to commence construction and safely deliver Australia’s next lithium operation in line with our schedule to produce first quality lithium concentrate by Q4 2022.”
Shares higher
This news has seen the company’s shares jump as much as 8.7% to an intraday high of A$0.625 while the market cap pre-open was approximately A$892 million.
The total amount of Ganfeng’s offtake equates to 300,000 dry metric tonnes and the agreement provides for pricing referenced to the market price for 6.0% Li2O spodumene concentrate, adjusted for actual Li2O content, and includes an agreed floor price.
Adds to Yahua offtake
This adds to the previously announced binding offtake agreement with Yahua for 75,000 tonnes per annum over four years.
Together, these agreements account for approximately 80% of Finniss’ production over the first four years of mine life.
The agreement with Ganfeng begins on the effective date of commercial production at Finniss and will cease on the date that is four years after commencement of supply. It can be terminated by Ganfeng if the effective date of commercial production does not occur by December 1, 2023.
Now unconditional
This offtake is now unconditional following satisfaction of the conditions precedent:
- Chinese regulatory approvals;
- Approval of the share placement by Core shareholders (received on September 17, 2021); and
- Core entering binding arrangements for a minimum total financing of no less than A$80 million, which was satisfied by an institutional placement in August 2021.
The company has now received A$34 million of funds from Ganfeng and will shortly complete its subscription for 100,591,715 fully paid ordinary shares in the company.
Upon completion of the equity investment, Ganfeng will hold approximately 6.1% of Core shares.
Proceeds of this investment will contribute towards the development of Finniss.
Core's financial adviser on this transaction is Jett Capital Advisors LLC.