The agreement with South Korean-based LGES is for the supply of up to 150,000 dry metric tonnes (DMT) per annum of spodumene concentrate produced at Kathleen Valley expected to commence in 2024, representing approximately one-third of the project’s start-up SC6.0 production capacity of ~500ktpa.
LGES is a global leader in delivering advanced lithium-ion batteries for electric vehicles (EVs), mobility and IT applications and energy storage systems (ESS). LGES is a major EV battery supplier for leading global automakers and is continuing to rapidly expand its business amid growing demand for lithium-ion batteries from the EV sector globally.
Liontown has been disciplined in executing its offtake strategy for Kathleen Valley, targeting large foundation agreements which aim to deliver diversification both by geographic location and customer position in the global battery value chain, while at the same time retaining some capacity to sell into the rapidly growing spot market.
The company continues to receive very strong interest from a range of parties in long-term offtake from the Kathleen Valley Lithium Project.
The offtake term sheet with LGES is the first offtake arrangement secured for Kathleen Valley and represents a significant milestone for Liontown and its offtake strategy. It also represents LGES’ first binding commitment to acquire Australian-sourced spodumene concentrate and is aligned with the commitment expressed recently by both Australia and South Korea to identify greater opportunities for both countries to trade with each other, as reported during the recent visit to Australia by the South Korean President.
As outlined in the Definitive Feasibility Study (DFS) completed in November 2021, Liontown expects first production from Katheen Valley in Q2, 2024 with initial base production of 2.5Mtpa delivering ~500,000tpa of spodumene concentrate. Supply of spodumene concentrate under the offtake term sheet represents approximately 30% of annual production after Year 1.
Under the offtake term sheet, pricing is determined by a formula-based mechanism linked to market prices for Lithium hydroxide. Using today’s market pricing for Lithium hydroxide, 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 Offtake Term Sheet will be determined by market prices at the time of each shipment.
Liontown and LGES will now work together to enter a definitive full form binding offtake agreement.
Liontown is continuing to progress negotiations with other potential Tier-1 global customers which would complement its off-take strategy.
Commenting on the offtake term sheet with LGES, Liontown’s managing director and CEO, Tony Ottaviano, said: “The signing of this historic first Offtake Term Sheet for Kathleen Valley represents a fantastic outcome for our shareholders and marks a very satisfying result for the Liontown Board and team.
“We have been steadfast in our strategy to negotiate terms that we believe accurately reflect the significance of our position in the global lithium market, as well as the quality and location of our Kathleen Valley resource to ensure that we extract the best value for our shareholders.
“Not only is this offtake term sheet consistent with our strategy, it also represents a strong validation for the Tier-1 credentials of the Kathleen Valley Project as one of the world’s premier new spodumene projects. Having a customer of the calibre and standing of LGES endorse the project, by signing up to become a foundation customer, represents a significant vote of confidence in Kathleen Valley and in Liontown’s ambition to become a globally significant provider of battery materials for the clean energy market.
“We are very pleased to have reached agreement with LGES, a respected global leader in the lithium battery value chain, and look forward to working with them as long-term partners for many years to come.”
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