Australian Vanadium Ltd (ASX:AVL) has passed a key milestone with the signing of a non-binding term sheet with Wingsing International Ltd, the commercial arm of Tianzhu Steel, for the sale of iron titanium (FeTi) coproduct from its namesake project at Gabanintha in Western Australia's Mid West.
The term sheet is a further step from a letter of intent (LOI) signed in March this year, confirming market interest in coproduct as AVL continues to develop its FeTi customer base in China and South East Asia.
This conditional agreement is for an initial 50,000 tonnes per annum of AVL’s FeTi coproduct with an option to increase volumes after the first year.
AVL plans to annually produce around 900,000 tonnes of the FeTi coproduct from the Australian Vanadium Project after the production of about 11,000 tonnes of vanadium pentoxide from its proposed mine and processing facility.
Next step towards offtake agreement
The non-binding term sheet extends the terms of the LOI and is the next step towards finalising a binding offtake agreement.
AVL managing director Vincent Algar said: “We are delighted to make this progression with Tianzhu Steel to lock in supply of this unique product which is able to cost-effectively improve mill operational efficiency.
“We will continue to progress the agreement through to binding offtake as we work to secure finance for the Australian Vanadium Project and commence construction.”
Term sheet summary
The term sheet is non-binding and has been prepared to list the key clauses which the parties intend to incorporate into future sales and purchase agreements for AVL’s FeTi coproduct.
The parties have agreed to negotiate and enter into a formal offtake agreement in replacement of the term sheet.
This term sheet outlines the product specifications, a term of three years from the commencement of production and an annual quantity of 50,000 tonnes for the first year with mutual agreement of the quantity from year two onwards.
It also includes provisions for trial materials as they become available, as well as a better definition of pricing formulas.
The term sheet remains in full force until the earlier the date the term sheet is replaced with the offtake agreement or at any other time by mutual agreement between the parties.
The price of the FeTi coproduct will be referenced to the 62% Fe Platts Iron Ore Index or other agreed price index, with a mutually acceptable price adjustment reflecting the market situation at the time and based on amicable consultation.