Battery Metals: Lithium producer Altura surges to 8-month highs on long-term offtake deal

Some good news for WA’s beleaguered lithium sector as Altura (ASX:AJM) locks in a binding, multi-year offtake agreement with battery materials manufacturer and major shareholder Shanshan.

China-based Shanshan has market cap of ~$2.7bn and is one of the world’s largest suppliers of lithium-ion battery materials including cathodes, anodes and electrolytes.

Altura — Australia’s second lowest cost lithium producer — says it will be a key supplier to Shanshan’s new chemical plant, which has planned phase-one production capacity of 25,000 tonnes per annum lithium carbonate equivalent (LCE).

A phase-two expansion will take overall output to 45,000 tonnes per annum LCE. Construction of this plant kicked off in April.

Years two to five of the five-year offtake agreement (2021 to 2025) have a confirmed minimum annual quantity of 60,000 dry metric tonnes (dmt).

This is a significant amount, with Altura’s current infrastructure boasting production capacity of 220,000tpa.

A separate contract for 2020 will see Altura provide 44,000dmt spodumene concentrate (SC6) product “in line with market price”.

Investors loved the news, sending the stock up +20 per cent in early trade.

Altura boss James Brown said the offtake agreement with Shanshan further diversified Altura’s customer base and de-risked sales channels.

“Our customer list boasts some of the biggest and best names in the battery materials sector and adding Shanshan to that list further demonstrates the market’s increasing desire for stable, long-term, high-quality lithium concentrate supplies,” he says.

“[Shanshan] have seen Altura’s performance in the recent declining market as testament to Altura’s market leading operation.

“Our product quality, consistency and demonstrated ability to meet our cost structure positions Altura well.

“With Shanshan now a key customer, as well as major shareholder, our interests are well aligned.”

Lithium producers like Altura are yet to make any big predictions around the impacts of COVID-19 on their businesses and the industry going forward.

But completion of a milestone $305m refinancing package and “continued operational improvements during the quarter leaves Altura well-placed for the coming months,” the company said in its Q1 report.

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