European Lithium Ltd (ASX:EUR, OTCQB:EULIF) has marked a major milestone in the development of the Wolfsberg Lithium Project in Austria, signing the first offtake agreement for battery-grade lithium hydroxide with global automotive giant BMW through EUR’s Austrian subsidiary ECM Lithium AT GmbH.
In one of the first offtake agreements BMW has signed directly with a mining company, the auto manufacturer has secured the first right to purchase 100% of lithium hydroxide production from currently identified resources at Wolfsberg.
“With the signing of the binding offtake agreement with BMW, our first offtake is secured and we look forward to partnering with BMW in the future,” European Lithium executive chair Tony Sage said.
Just a few weeks ago BMW announced it would double investment in its Hungarian electric vehicle (EV) factory to US$2.1 billion, investing in a high-voltage battery assembly facility to support the production of more EVs.
As a result of rapidly expanding investment in electric vehicle manufacturing, the price of lithium hydroxide has also increased dramatically in several markets, including in Europe, where analysts predict the passing of the 'Critical Raw Material Act' will increase demand five-fold by 2023.
Offtake agreement terms
Securing this first offtake agreement is a huge step forward for EUR, underpinning the financials of Wolfsberg and creating a far more desirable scenario for net present value (NPV) calculations within the project’s definitive feasibility study.
The material terms of the agreement are:
- Prepayment - BMW to make an advance payment of US$15 million to ECM to be repaid through equal set-offs against lithium hydroxide delivered to BMW.
- Conditions - Successful start of commercial production and full product qualification and certification.
- Commencement - supply of lithium hydroxide product expected to begin in 2026 and continue for six years until 2031, at which time the offtake agreement can be extended for three years.
- Pricing - will be based on fast market spot prices for lithium hydroxide with a discount applied.
- Quantity - approximately 50,000 metric tonnes of battery-grade lithium hydroxide, commencing in the first year with 5,000 metric tonnes and 9,000 metric tonnes each year thereafter.