AVZ Minerals higher on signing milestone first lithium offtake agreement with China’s largest lithium compound producer

AVZ Minerals Ltd (ASX:AVZ) (OTCMKTS:AZZVF) (FRA:3A2) is trading higher after secured a strategic, long-term offtake agreement with GFL International Co Ltd, a subsidiary of China’s largest lithium compounds producer, Ganfeng Lithium Co Ltd.  The offtake agreement is for an initial five-year term, with an option to extend for a further five years, for spodumene concentrate (SC6) from the Manono Lithium and Tin Project in the DRC.  GFL will take 30% of the Manono lithium project’s initial saleable SC6 yearly tonnage.  Shares have been as much as 28% higher intra-day to 12.5 cents, a new two-year high while the company's market cap sits at approximately $281 million. "Reinforces Manono as world-class" AVZ managing director Nigel Ferguson said: “We are very pleased to finalise these discussions with GFL and to sign our first lithium offtake agreement. “The fact we have signed our first offtake agreement with China’s largest lithium compound producer just reinforces our belief that the Manono Project is world-class. “GFL has signed on to take 30% of the Manono Project’s initial saleable SC6 yearly tonnage, which is a massive endorsement for our project. “Over the coming months, I look forward to finalising other offtake agreements which are currently under negotiation, not only for our lithium products but also for our tin and tantalum materials.” Financing options Ferguson added: “This SC6 offtake agreement with GFL will also greatly assist the company in meeting any conditions precedent that are required for our prospective financiers. “I look forward to updating our shareholders and the market with respect to the company’s financing options for the Manono Project early in the New Year.” Key terms of deal The key terms of the offtake agreement, among others, include: ➢ Annual supply: Ramping up to 160,000 dry metric tonnes of spodumene concentrate from year three onwards; ➢ Pricing: CIF, China determined by a formula which references pricing of lithium carbonate and lithium hydroxide, with appropriate adjustments for quality and including a scaled collar price mechanism. If the term is extended for a further five years, a review of the pricing formula may be triggered with reference to agreed market parameters; ➢ Payment: payment for each shipment will be made by an irrevocable letter of credit; ➢ Agreement by the parties to place importance and focus on environmental, social and governance (ESG) development through the agreement; ➢ Termination rights: include occurrence of an insolvency event and material breach of the offtake agreement including non-payment or failure to supply or take annual tonnage requirements Ganfeng Lithium Ganfeng Lithium is also the world’s third-largest lithium compounds producer and the world’s largest lithium metals producer in terms of production capacity as of December 31, 2017. The company offers five major categories of more than 40 lithium compounds and metals products, which they believe is one of the most comprehensive product offerings among the lithium compounds and metals suppliers in the world. Ganfeng Lithium has a vertically integrated business model, with operations along the critical stages of the value chain, including upstream lithium extraction, midstream lithium compounds and metals processing as well as downstream lithium battery production and recycling. Ganfeng Lithium’s comprehensive suite of product offerings enables it to effectively address the unique and diverse products needs of its customers who mainly come from battery-related end markets and have a broad variety of requirements and specifications.