Liontown Locks Down Tesla Spodumene Deal

Lithium hopeful Liontown Resources has finally wrapped up a sales deal to sell spodumene concentrate to electric vehicle giant Tesla, a week after it was supposed to be finalised.

Monday of last week saw Liontown advise there was a small delay in completing the arrangement and yesterday revealed that it and Tesla had signed off on the contract.

The spodumene concentrate will come from the Kathleen Valley Lithium Project in WA and is due to start from 2024.

News of the finalised contract saw Liontown shares sag 2.75% to $1.235 on high volume of more than 10 million shares.

That was probably linked to the negative publicity from a series of tweets from Elon Musk late last week about a 10% staff cut (later softened to a ‘flat employment numbers of white-collar staff this year and higher numbers of assembly line workers’) and his fears about the health of the American economy which he said were “Super-bad”.

The deal was highlighted in an announcement by the two companies in February and covers a five-year period which will see Tesla purchase 100,000 dry metric tonnes (DMT) of concentrate in the first year, increasing to 150,000 DMT a year in subsequent years.

Liontown said pricing will be determined using a formula-based mechanism referencing market prices for battery-grade Lithium Hydroxide Monohydrate.

One-third of the Project’s start-up SC6.0 production capacity of around 500,000 tonnes a year. Supply is expected to commence in 2024 and the agreement is conditional upon Liontown commencing commercial production at the Kathleen Valley Lithium Project by no later than December 1, 2025.

The offtake agreement with Tesla is the second definitive agreement secured for Kathleen Valley following the first offtake agreement with LG Energy Solutions (refer ASX announcement, 2 May 2022). Together with the LG Energy Solutions agreement, this means that up to 60% of Liontown’s planned production is now covered by long-term agreements with high-quality customers, the company told the ASX on Monday.

Liontown says it continues to receive very strong interest from a range of parties for the remaining third offtake which will, once completed, result in approximately 85% of the production from Kathleen Valley contracted. The remaining production will be sold on spot or Liontown has an option to sell to existing customers.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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