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Liontown (ASX:LTR) signs first offtake term sheet with LG Energy

ASX News, Materials
ASX:LTR      MCAP $2.970B
12 January 2022 11:23 (AEST)
Liontown Resources (ASX:LTR) - MD and CEO, Tony Ottaviano (left) and Technical Director, David Richards (right)

Company directors with concentrate sample. Source: Liontown Resources

Liontown Resources (LTR) has signed its first offtake term sheet with one of the world’s premier battery manufactures, LG Energy Solution, for its Kathleen Valley Lithium Project.

The company said this is a major step towards the development of Kathleen, which is located approximately 400km north of Kalgoorlie in the North-eastern Goldfields of Western Australia. 

Under the offtake term sheet, the South-Korean based LG Energy Solution will purchase 100,000 dry metric tonnes (DMT) in the first year, increasing to 150,000 DMT per year in subsequent years.

Pricing is to be determined using a formula-based mechanism referencing market prices for Lithium Hydroxide Monohydrate.

The agreement is expected to commence in 2024 when Kathleen Valley is expected to start producing spodumene concentrate and will extend for a further five years.

LG Energy Solution is a global leader in delivering advanced lithium-ion batteries for electric vehicles, mobility and IT applications and energy storage systems.

Liontown said it has been disciplined in executing its offtake strategy for Kathleen Valley, targeting large foundation agreements which aim to deliver both by geographic location and customer position in the global battery value chain.

The company is continuing negotiations with several tier-1 customers.

Managing Director and CEO Tony Ottaviano said the signing of the first offtake term sheet is a “fantastic outcome for shareholders”.

“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,” he said.

“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.”

According to the announcement, the companies are to negotiate “in good faith to enter a definitive full form offtake agreement no later than 28 February 2022 (unless extended)”.

The offtake term sheet has a supply term of five years from the commencement of commercial production to supply, with LG Energy Solution having the right to terminate the deal if commercial production has not occurred prior to June 30, 2025.

On the market this morning, Liontown was up 3.23 per cent and is trading at $1.60 per share at 11:23 am AEDT.

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