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Australia's Core Lithium Rises on Tesla Supply Deal News
Core is fully funded and set to deliver first production of lithium concentrate from the project in Q4 2022.
Shares of the Northern Territory-focused company jumped almost 15 percent following the news, from a closing price of AU$0.83 on Tuesday (March 1) to AU$0.95 on Wednesday (March 2).
The legally binding term sheet with Elon Musk’s Tesla will see Core Lithium supply the car company with up to 110,000 tonnes of lithium oxide spodumene concentrate from its Finniss lithium project over four years.
Core will begin supplying Tesla in the second half of 2023. Pricing for the material will be referenced to the market price for spodumene concentrate, but will be subject to a price floor and ceiling.
Construction at Finniss, located near Darwin, kicked off last year after a final investment decision in September. Core is fully funded and set to deliver first output of lithium concentrate from the project in Q4 2022.
A definitive feasibility study published in 2021 for Finnis shows average production of 175,000 tonnes per year of high-quality lithium concentrate at a C1 operation expenditure of US$364 per tonne; startup capital costs are set at AU$89 million with a "rapid" payback period of two years.
In addition to its Tesla deal, Core Lithium has four year offtake agreements with Ganfeng (SZSE:002460), one of the world’s largest lithium producers by production capacity, and Yahua, a key lithium supplier to Tesla.
US-based Tesla has also agreed to potentially provide additional support to Core with its plans to develop lithium chemical processing capacity in the Northern Territory.
Aside from its deal with Core, Tesla has a deal for lithium with junior Liontown Resources (ASX:LTR), plus agreements with BHP (ASX:BHP,LSE:BHP,NYSE:BHP) for nickel and Syrah Resources (ASX:SYR) for graphite.
Many analysts believe 2022 will see lithium demand continue to outpace supply, and as a top lithium-producing country, Australia is well positioned to see gains from the energy transition.
Speaking with the Investing News Network earlier this year, Jessica Amir, Australian market strategist at Saxo, said lithium is a key metal to watch in 2022.
“The lithium price is tipped to continue to rise to another record,” she said, adding that major lithium producers are optimistic about the space due to a lack of mining investment and rising demand.
As of market close on Wednesday, shares of Core Lithium were trading at AU$1.64.
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Securities Disclosure: I, Priscila Barrera, currently hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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