In what the company labels as a “landmark occasion”, Australian Mines (ASX: AUZ) has secured an offtake agreement with SK Innovation for 100% of its anticipated cobalt and nickel production for seven years from its flagship wholly-owned Sconi cobalt, nickel and scandium project in Queensland.
A global lithium-ion battery manufacturer for the electric vehicle market, SK Innovation will purchase 100% of Sconi’s nickel and cobalt production at volumes of 12,000 tonnes per annum of cobalt sulphate and 60,000tpa of nickel sulphate.
The agreement also allows for a six-year extension.
In addition to the offtake deal, SK Innovation will assist Australian Mines in optimising its current bankable feasibility study for Sconi.
The battery manufacturer will also help with enhancing the proposed Sconi processing plant and mining operation through sample validation.
As well as the collaboration and offtake agreements, SK Innovation will also purchase up to a 19.9% slice of Australian Mines – buying up around 669 million shares at A$0.12 each.
The agreement remains subject to regulatory terms and conditions and shareholder approvals including SK Innovation validating the suitability of Sconi’s cobalt and nickel in its batteries.
Australian Mines must also obtain financing to develop Sconi by the end of the calendar year.
If shareholders approve SK Innovation’s 19.9% purchase of Australian Mines, then the proceeds will fund Sconi’s initial construction phase.
Commenting on the deal, Australian Mines managing director Benjamin Bell said it was a “landmark occasion” for the company and its shareholders.
“As the only Australian cobalt, nickel, scandium company to have secured an off-take for 100% of its expected cobalt and nickel output, the company has, once again, demonstrated the Sconi project in northern Queensland is the most advanced project of its type in Australia, and that Australian Mines is unequivocally a leader in Australia’s cobalt sector,” Mr Bell added.
In addition to this agreement, Australian Mines boosted its cash reserves in early November last year after a A$20 million placement was completed – twice what the company had originally intended.
Sconi is situated about 250km from Townsville and is close to port, roads, electricity, housing, a skilled workforce, water and telecommunications infrastructure.
The project’s maiden resource sits at 89 million tonnes grading 0.06% cobalt and 0.58% nickel and has a forecast 20-year mine life.
The resource includes a measured category of 17Mt grading 0.80% nickel and 0.07% cobalt.
A bankable feasibility study is underway and due for completion in April.
Trial mining was carried out in September last year with ore to be sent to the company’s Western Australian-based demonstration-sized processing plant.
The plant is due for commissioning imminently with first cobalt sulphite, nickel sulphate and scandium oxide samples to be sent to potential offtake partners by the end of the month.
Australian Mines announced its voluntary suspension would lift at the start of trade tomorrow Tuesday 20 February.