On Wednesday (February 16), Australian lithium miner Liontown Resources Ltd issued a statement saying it had signed a five-year, legally binding sales and purchase (preliminary) agreement with electric vehicle maker Tesla.
Tesla will purchase 100,000 dry tons (DMT, weight after moisture) from Liontown in the first year of the agreement (2024) and increase it to 150,000 dry tons per year in subsequent years, the statement shows.
Liontown said in a statement that the spodumene concentrate supplied to Tesla will come from its $473 million Flagship Lithium Mine project in Western Australia, the $473 million Kathleen Valley, which is expected to begin commercial production by 2025.
(Source: Liontown official website)
Previously, Liontown signed an agreement with LG Energy Solutions (LGES) for the same amount of purchases. This means that if Tesla and Liontown reach a final agreement, Tesla and LGES will each contract 1/3 of their production before the Kathleen Valley project starts.
Negotiations must be completed by the end of May
The agreement also states that the pricing of the lithium concentrate sold by Liontown will refer to the market price of lithium hydroxide monohydrate. Over the past few years, lithium prices have soared as automakers have tilted toward an electrification strategy, about 8 times higher than in early 2021.
However, the agreement states that the parties must also complete negotiations and implement a detailed final agreement by May 30, 2022, or the preliminary agreement will be terminated.
Liontown said Tesla is in the "first echelon" of companies downstream in its value chain, in line with its offtake strategy, and the company will also negotiate with other potential and customers about the remaining production.
Boosted by the news, Liontown's as-stock listed on the Australian Securities Exchange jumped nearly 15 percent.
(Source: Tradingview)