European Lithium has received a massive vote of confidence with premium automobile manufacturer BMW AG signing up to be its first offtake partner for battery-grade lithium hydroxide.

While the agreement is still at an early stage, the fact that a company of BMW’s size and influence has agreed to negotiate suitable commercial terms for the purchase of the battery chemical speaks volumes about the value of its Wolfsberg lithium project in Austria.

BMW AG sold over 2.5 million passenger vehicles and more than 194,000 motorcycles worldwide in 2021 through its BMW, MINI, Rolls-Royce and BMW Motorrad brands.

It had previously flagged that by 2030, 50% of its sales would be electric vehicles, a move that is certainly welcome in the European Union given its move to effectively ban petrol and diesel cars from 2035.

“Securing our first offtake with BMW AG is another key milestone for the company. Partnering with BMW AG is an ideal fit for EUR,” European Lithium (ASX:EUR) chairman Tony Sage said.

Milestone deal

Under the MoU, the two companies will work together to negotiate suitable commercial terms for BMW AG to purchase lithium hydroxide produced by European Lithium.

BMW AG has been granted the first right to purchase 100% of the lithium hydroxide produced from identified resources at the project, which currently stands at about 12.88Mt grading 1% Li2O.

Should both parties agree to a binding contract, BMW AG will make an upfront payment of US$15 million, which will be repaid through equal offsets against deliveries of the battery chemical.

Proceeds from the prepayment will be used for the development of the Wolfsberg Project including supporting the commencement of the construction phase and further progress towards the successful implementation of the Wolfsberg Project.

Lithium in the heart of Europe

Wolfsberg is located in Carinthia, 270km south of Vienna and 20km east of Wolfsberg, an industrial town, with established infrastructure, including access to the European motorway and railway network.

European Lithium plans to produce 10,500t of lithium hydroxide at a mining rate of 770,000tpa over a maximum period of 20 years, providing a long-term supply of high quality lithium chemicals to the European battery market.

While the Definitive Feasibility Study is due for release later this year, study consultants DRA Global have already placed a whopping AUD$862 million independent net present value on the project.

This highlights the benefits of being located in Europe, which has been accelerating its shift away from fossil fuels.

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This article was developed in collaboration with European Lithium, a Stockhead advertiser at the time of publishing.  

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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