Kidman Resources (ASX:KDR) has entered into a non-binding memorandum of understanding (MOU) with Korean chemical company LG Chem (KRX:051910) to supply lithium hydroxide from the Mount Holland project over a 10-year term.

The MOU entails Kidman supplying 12,000 tonnes of lithium hydroxide per year to LG Chem at a cost to be determined by market prices on a basis that will support Kidman’s proposed debt funding.

While other terms of the MOU have been kept confidential, the companies are working towards executing a binding strategic supply agreement by the end of July 2019.

Kidman is currently in the midst of securing offtake agreements for 75 percent of its share of lithium hydroxide production for Mount Holland’s initial years in Western Australia.

Mount Holland is a 50/50 joint venture between Kidman and major lithium producer Sociedad Química y Minera de Chile (NYSE:SQM).

The proposed LG Chem MOU accounts for about 50 percent of Kidman’s share of Mount Holland’s production, which sits at 22,600 tonnes for Kidman and 44,000 tonnes in total.

Upon finalization, the company will have met its offtake goals for Mount Holland as it already achieved an offtake agreement with Tesla (NASDAQ:TSLA) and a binding heads of agreement with Mitsui & Co. (TSE:8031) earlier this year.

“Today’s announcement is a significant milestone towards Kidman’s objective of securing offtake arrangements over approximately 75 percent of our share of production in the initial years of the project,” Kidman CEO and Managing Director Martin Donohue said in a statement.

“LG Chem is the world’s number one automotive battery supplier and will continue to be a major supplier to the rapidly growing electric vehicle segment. We are pleased to be announcing this MoU and look forward to further developing our relationship with them,” he added.

According to a prefeasibility study and updated scoping study for the project released in late October, Mount Holland is docketed to see life-of-project revenue of US$33.5 billion with a 47-year life.

Kidman’s share price was down 7.2 percent on the ASX at the end of trading on Wednesday (December 19), closing the day at AU$1.16.

Don’t forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.