Lithium: Shares leap as Pilbara locks in new offtake, Infinity pencils in project finance
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A fresh offtake deal for miner Pilbara Minerals and a project funding agreement for EU-based Infinity could point to a brighter future for the lithium sector.
Battling falling prices even before the ‘coronacrisis’ hit, lithium stocks had been stuffed in the bottom drawer by many investors.
In February, spodumene concentrate prices nudged lower to an average $US463 ($697) per tonne — a 46 per cent drop from the same period last year — due to that ‘overhang’ in Chinese stockpiles.
WA hard rock producers like Pilbara Minerals (ASX:PLS), Altura Mining (ASX:AJM) and Galaxy Resources (ASX:GXY) have been curbing exports in response but this excess feedstock — estimated at 25,000t LCE (lithium carbonate equivalent) — is still expected to persist through the first half of the year at least, Benchmark says.
But in the background things are still happening. In February, Altura locked in a crucial $305m refinancing deal which allows it to keep the lights on during this difficult period.
Today, neighbouring WA producer Pilbara Minerals signed a new five-year, 75,000-tonne-per-annum (tpa) offtake agreement with Chinese lithium chemical firm Yibin Tianyi.
Yibin Tianyi is set to become a key cog in the supply chain of Contemporary Amperex Technology (CATL), the world’s bigger lithium-ion battery maker (and major Pilbara Minerals shareholder).
Yibin Tianyi’s first 25,000tpa LCE plant is currently under construction and targeting production from June 2020, Pilbara says.
60,000tpa will be supplied in 2020, increasing to a minimum 75,000tpa for the remainder of its term. An initial shipment of 20,000t was delivered this month.
So far, Pilbara Minerals says has it has not experienced any material impact to its Pilgangoora operations as a direct result of the coronavirus situation – but things are changing fast.
“While there has understandably been some disruption within the China supply chain as a result of COVID-19 (where the company’s largest customers are based), the ability to secure sales, credit, and shipping has continued to function within China,” Pilbara Minerals says.
“At this stage, the company anticipates that shipped tonnes for the March 2020 quarter will be consistent with the lower end of previously announced guidance of 35kt-50kt.”
The miner also has a pretty strong balance sheet following a $111.5m cap raise late last year.
Meanwhile, Infinity Lithium (ASX:INF) has penned a non-binding investment and project collaboration deal with EU-backed fund InnoEnergy to develop the San José lithium project in Spain.
An initial staged €800,000 (~$1.5m) investment in Infinity — at a 66 per cent premium to its last traded share price — will fund phase one of Infinity’s innovative lithium conversion process, the company says.
EIT InnoEnergy will then lead fundraising activities for phase two of the pilot plant project, which could cost somewhere between $3m and $4.5m.
Most importantly, EIT InnoEnergy can help Infinity secure full project financing including both equity and debt, “as previously demonstrated through successful assistance in project funding within the European lithium-ion battery supply chain”, Infinity managing director Ryan Parkin says.
“We aim to turn this MoU into a binding agreement quickly,” he says.
“The financial and collaborative agreement and endorsement of the major EU Platform Steering group (EIT InnoEnergy) will bring together project partners throughout the EU lithium-ion battery supply chain to fund and develop EU’s largest battery grade lithium hydroxide plant.
“Our project is a critical component in the European Commission Vice President Maroš Šefčovič’s foresight to address the key strategic issue for the EU’s battery value chain, namely to develop access to raw materials and refining capacity, whilst promoting a high sustainability criteria for batteries placed on the EU market.”