Australia-based battery materials company Liontown Resources Limited announced that it has entered into a legally binding sales and purchase term sheet (Agreement) with electric vehicle manufacturer Tesla for the supply of spodumene concentrate.

 

The Agreement is for the supply of up to 150,000 dry metric tonnes (DMT) per annum of spodumene concentrate to be produced at Liontown’s Kathleen Valley Lithium Project in Western Australia (Kathleen Valley) and is expected to commence in 2024, representing approximately one-third of the Project’s start-up SC6.0 production capacity of ~500ktpa. 

 

The Agreement with Tesla is the second offtake arrangement secured for Kathleen Valley following the foundational offtake arrangement with LG Energy Solutions. Together with the LG Energy Solutions arrangement, this means that more than half of Liontown’s planned production is now covered by long-term agreements with high-quality customers. 

 

Under the Agreement with Tesla, pricing is determined by a formula-based mechanism linked to market prices for Lithium Hydroxide Monohydrate. Using today’s market pricing, the contract terms would deliver an SC6.0 price outcome for Liontown that is greater than the pricing assumptions used in the DFS. Notwithstanding this, investors should note that the pricing received by Liontown under the Agreement with Tesla will be determined by market prices at the time of each shipment.

 

Liontown and Tesla will now work together to complete the negotiation and execution of detailed definitive agreements which must be completed and executed by 30 May 2022. Liontown cautions investors that there is no assurance that the definitive agreements will be entered into by this date and as a result, the Agreement may be terminated unless extended by mutual agreement of Liontown and Tesla.

 

Commenting on the Agreement with Tesla, Liontown’s Managing Director and CEO, Tony Ottaviano, said, “Securing our second offtake sales agreement is another fantastic milestone for Liontown towards the development of the Kathleen Valley Lithium Project, and we are absolutely delighted to have signed this agreement with leading EV manufacturer, Tesla.

 

“Tesla is a global leader and innovator in electric vehicles and having it sign up to become a significant customer is a tremendous achievement and another huge vote of confidence in the quality of the Kathleen Valley Project. This means that we now have two of the premier companies in the global lithium-ion battery and EV space signed up as foundational customers, marking a significant step towards realising our ambition to become a globally significant provider of battery materials for the clean energy market. Our shareholders should be proud that future Tesla cars will be powered by Liontown lithium”.

 

“We are also continuing to progress discussions with additional potential customers for the remaining available production and we are looking forward to announcing additional arrangements in the weeks ahead as we continue to implement our strategy to develop the project and deliver value for our shareholders”