Core Lithium to cough up US$2M to cancel offtake deal; says good for restart

Core Lithium (ASX:CXO) has revealed the cost of cancelling its binding offtake agreement with Chinese Yahua Co – a sweet US$2M (A$3.1M).

The settlement payment to release the contract comes after it was signed in 2019; updated again in 2022, and then as lithium prices collapsed shortly thereafter.

it was simple economics that caused prices to tumble: attracted by high margins, many producers began mining lithium, boosting supply, therefore pushing down prices even as demand stayed high.

And now there’s still a whole lot of supply, but, less demand as dynamics in EV markets and elsewhere have changed in the last few years. So that’s bad news for lithium miners when it comes to share prices (and for anybody still holding a bag.)

And those low prices, for those holding them in the forefront of their mind, may make surprising Core’s Monday claim the fact it has to pay US$2M to Yahua frees up Core’s ability to restart the NT-based Finniss project.

It was from Finniss Core was formerly bound to supply Yahua with spodumene.

“The settlement of this legacy offtake agreement provides greater scope and opportunity for securing strategic funding sources to support a future restart of the Finniss Lithium Operation, which remains subject to Board approval,” Core CEO Paul Brown said.

“We appreciate the constructive approach of Yahua in reaching this agreement, which reflects the long relationship between our two companies.”

If only for trivia, it’s worth considering Yahua has also inked offtake deals with household name Pilbara Minerals (ASX:PLS).

As for Core Lithium, the economics of the Finniss restart will be hotly anticipated by shareholders until the June quarter, when the Finniss Restart Study is due to be published.

The elephant in the room, of course – which many ASX-listed lithium players aren’t too willing to acknowledge – is the cratering of underlying commodity prices.

CXO last traded at 7cps.

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