European Lithium Ltd (ASX:EUR, OTCQB:EULIF) has signed its first ever offtake agreement, teaming up with automotive powerhouse BMW AG to supply lithium hydroxide from the Wolfsberg Lithium Project, in Austria.
Under a non-binding memorandum of understanding, the lithium stock is poised to exclusively supply its battery-grade lithium hydroxide to the multinational luxury vehicle manufacturer.
This means BMW will have the first right to purchase 100% of the lithium hydroxide produced from EUR’s battery-grade assets, such as its flagship Wolfsberg Lithium Project.
In an announcement today, EUR chair Tony Sage said the maiden offtake agreement was another key milestone and that BMW was “an ideal fit” for the company.
It is significant in that a major car manufacturer recognises the value of miners in the EV transition supply chain.
BMW is going green
With its four brands — BMW, MINI, Rolls-Royce and BMW Motorrad — the BMW Group is the world’s leading premium manufacturer of automobiles and motorcycles and a provider of premium financial and mobility services.
In 2021, the group sold more than 2.5 million passenger vehicles and in excess of 194,000 motorcycles worldwide.
Now, BMW is on a mission to be carbon neutral by 2050, and to get there, it’s aiming to reduce carbon emissions from its vehicles by at least 40% through 2030, meaning electromobility is key to its sustainability vision.
Last year, the German automaker sold more than 328,000 electric and electrified vehicles, and demand shows no signs of slowing down.
Based on current market forecasts, the group expects at least 50% of its global sales to come from fully electric vehicles in 2030.
BMW define its success as borne out of long-term thinking and responsible action. As such, securing deals that cement its battery metal and resource supply is critical for the luxury carmaker as it makes sustainability and efficient resource management central to its strategic direction, from the supply chain through production to the end of the use phase of all products.
What’s in it for EUR?
If both parties dot the I’s and cross the T’s on a binding offtake contract, then BMW will pay US$15 million upfront, which will be repaid through equal set offs against the lithium hydroxide that’s delivered.
In turn, European Lithium will use the prepayment to develop its wholly owned Wolfsberg Project, a hard rock lithium deposit with 9.7 million tonnes of ore across the measured and indicated resource categories.
Specifically, the cash injection will support EUR as it kicks off the project construction phase and advances Wolfsberg towards its ultimate goal: to become a major lithium producer in Europe, a hotspot for electric vehicle manufacturers.
The partnership with BMW allows EUR to focus on the final development stages and implement the Wolfsberg project while it builds a portfolio of prospective battery metal projects across the continent.