Australian Lithium Miners Strike Supply Deals with Chinese Firms

Australian miners continue to strengthen their relationships throughout the supply chain as the race to secure supplies of lithium, a key raw material in electric car batteries, picks up pace.

On Tuesday (July 9), Perth-based Pilbara Minerals (ASX:PLS,OTC Pink:PILBF) signed an additional offtake deal with Chinese automaker Great Wall Motor (OTC Pink:GWLLF,HKEX:2333) that is set to start in August.

The agreement is for 20,000 dry metric tonnes (dmt) per year for a six year period from production at Pilbara’s Pilgangoora lithium-tantalum project in Western Australia. Shares of Pilbara jumped more than 13 percent after the news.

“Great Wall has been pushing hard to expand its presence in the lithium-ion supply chain. This has culminated in it requesting that Pilbara Minerals make offtake available earlier and at a greater volume,” the Australian miner said in a statement.

In 2017, the company inked its initial deal with the Chinese automaker for up to 75,000 tonnes per year over a five year period. Pilbara’s offtake agreement with Great Wall was the first investment deal by an automaker into an upstream supplier of lithium raw materials. The Chinese firm also holds a 3.5 percent stake in Pilbara.

Sales volumes to Great Wall are expected to be in the range of 15,000 to 20,000 dmt during the second half of 2019.

Pilbara also notes in the press release that it will continue to make sales to additional customers in China. Aside from Great Wall Motors, the company has signed offtake deals with Chinese companies Ganfeng (OTC Pink:GNENF,SZSE:002460) and General Lithium as well as with South Korea’s POSCO (NYSE:PKX).

Last month, Pilbara announced it would limit production due to a slow ramp up of new conversion facilities in China, with total spodumene concentrate reaching 19,490 dmt in June.

The company expects sales for the December quarter to be in the range of 65,000 to 80,000 dmt, up from an estimated 35,000 to 48,000 dmt in the September quarter.

Pilbara was not the only Australian miner to strike a deal with a Chinese firm on Tuesday. Shares of Altura Mining (ASX:AJM,OTC Pink:ALTAF) inched up that day after it signed an offtake agreement with Chinese lithium materials producer Shandong Ruifu (SZSE:300243).

The binding deal is for 35,000 tonnes per year over a five year period from production at Altura’s Pilgangoora mine, which is located near Pilbara’s project. The first shipment is for 8,000 tonnes, and is scheduled for later this month.

“The offtake arrangement with Shandong Ruifu continues to broaden and strengthen our customer base,” Altura Managing Director James Brown said. “Shandong Ruifu previously received product from Altura in 2019 and to move forward from that initial cargo into a long-term contract is a very positive step forward for Altura.”

Aside from Shandong Ruifu, Altura has signed deals with Lionergy and Ganfeng. The company also announced the termination of an existing 50,000 tonne per year offtake deal with Shaanxi J&R Optimum Energy (SZSE:300116).

Altura’s mine started production in 2018 and has an output capacity of 220,000 tonnes per year of spodumene concentrate.

As of 2:30 p.m. EDT on Tuesday, shares of Pilbara were up 5.1 percent at AU$0.52. Meanwhile, Altura’s share price remained flat at AU$0.12.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.