Alliance Mineral to add market pricing, drop exclusivity in restructured offtake deal

SINGAPORE - Lithium miner Alliance Mineral Assets has restructured offtake agreements with Burwill Lithium to provide for market-linked pricing and the right to sell to other customers, according to an announcement to the Singapore Exchange on Tuesday (Jan 15).

As part of the deal, Burwill Lithium will transfer its rights and obligations as the buyer in the existing long-term offtake agreements to Jiangxi Bao Jiang Lithium Industrial, a 50-50 joint venture between Burwill Lithium and Jiangte Special Electric Motor. Jiangxi Bao Jiang operates one of three large lithium convertors at Jiangte's facility in Jiangxi.

Jiangxi Bao Jiang will buy the remaining 18,000 dry metric tonnes (dmt) from Alliance's 2018 production for US$15.8 million at the 2018 fixed price of US$880 per dmt. The estimated shipping date is end-January, 2019.

Repayments of US$8.8 million worth of outstanding interest free offtake prepayments will be frozen until 2021. Prepayments will remain interest free and be repaid at the rate of 15 per cent of the value of each lithium concentrate shipment from Jan 1, 2021 until it is fully repaid.

Exclusivity and pre-emptive rights have been removed from the agreements, which will allow Alliance to seek other buyers. The company said that it is seeking new offtake partners to purchase its remaining Stage 1 lithium and Stage 2 lithium concentrate production, and described interest as "strong" amid limited supply for 2019.

The amended agreements will now have a market-linked pricing mechanism, subject to a lower limit of US$680 per tonne and a cap of US$1080 per tonne for the remaining term ending on Dec 31, 2022. It will also provide for a commitment of 80,000 to 100,000 tonnes of lithium concentrate supply in 2019 and 100,000 to 140,000 tonnes per year between 2020 and 2022.

Production guidance for the period January to June 2019 has increased to between 65,000 dmt to 80,000 dmt of lithium concentrate from 55,000 dmt to 60,000 dmt for the six months between July and December 2018.

"The offtake agreement transfer from Burwill to Jiangxi is a good outcome for Alliance as it provides certainty for the demand of our premium quality spodumene concentrate while simultaneously freeing us up to sell approximately 50 per cent of our annual production to other customers." said Mark Calderwood, managing director of Alliance.

Alliance lifted a voluntary suspension on the trading of its shares following the announcement. The stock, which last traded at 25 cents on Dec 20, 2018, slipped 2 per cent or 0.5 cent to trade at 24.5 cents as at 10am on Tuesday.