Core Exploration (ASX: CXO) has signed a direct shipping ore (DSO) offtake agreement with a China-based party, which includes a US$20 million prepayment, for its 100%-owned Finniss lithium project in Australia’s Northern Territory.
The binding offtake agreement for 1 million tonnes of DSO accounts for more than 50% of Core’s anticipated life-of-mine production from the Grants lithium deposit within Finniss.
After either a five-year period, or purchasing 1mt of DSO, Core and the vendor Ya Hua International Investment and Development (Yahua) may elect to extend the agreement.
As part of the agreement, Core has first refusal over any additional Grants lithium, and the surrounding EL29698, up to either 500,000t of DSO or 25% of forecast production for any calendar year – whichever is greater.
The agreement takes into account current market prices, but comprises a price floor and ceiling.
“The signing of the first offtake and prepayment agreements for the Finniss lithium project is a significant milestone for Core, and we are delighted to have extended our strategic relationship with Yahua, as one of our largest shareholders, as a result of the recent A$2 million equity investment into Core,” Core managing director Stephen Biggins said.
At this early stage, Core is still assessing whether it will produce a DSO or process its ore further to create a lithium concentrate. The agreement between Yahua and Core allows for the duo to alter the arrangement to suit a lithium concentrate product instead.
“Within the space of just over 12 months, we have discovered and defined the Northern Territory’s first lithium mineral resource, completed a robust mining study in respect of the development of Grants as a high-grade DSO mine, applied for a mineral lease, and now concluded our maiden offtake and prepayment agreements – a key element which significantly de-risks our development plans,” Mr Biggins said.
On Monday this week, Core reported its adjacent Bynoe lithium project had revealed high-grade lithium intersections up to 54m wide grading 1.42% lithium.
Meanwhile, Grants has a current resource of 1.8mt grading 1.5% lithium, with both projects less than 100km from Darwin Port, where Core has an agreement to potentially export up to 1mtpa of DSO ore or up to 250,000tpa lithium concentrate.
Mr Biggins added the prepayment would assist with project development as the company transitions from explorer to producer.
He said the company aimed to become a long-term spodumene concentrate supplier to the lithium battery market.
Core’s share price was up more than 8% to A$0.098 in mid afternoon trade.