Galaxy Resources underpins Mt Cattlin lithium mine as Chinese explosives customer signs offtake extension

Lithium producer Galaxy Resources (ASX: GXY) and Sichuan province’s Yahua International Investment and Development have varied their existing offtake agreement to add a three-year extension from January 2023.

This comes against the background of a lithium market that is suffering weak demand.

Yahua, part of the Sichuan Yahua Industrial Group, manufactures and sells civil explosives, detonators and related products to mining, hydropower, national defence industries and geological exploration operators.

The extension covers the supply a minimum of 120,000 dry metric tonnesper annum of “high quality” spodumene concentrate from Galaxy’s Mt Cattlin operation at Ravensthorpe, Western Australia.

Plus, Yahua will buy an additional 30,000t during the remainder of 2020.

In May, the Chinese company opened a new plant in the city of Ya’an in southwest Sichuan province capable of producing 20,000tpa of lithium hydroxide.

Mt Cattlin supply deals

Galaxy said the new agreement underpins its Mt Cattlin operation as “a reliable, high-quality product that is qualified in major lithium supply chains throughout China and Japan”.

The existing contract, which expired at the end of 2022, is being extended to 31 December 2025, conditional on the two parties agreeing on a pricing mechanism from 2023 to 2025.

Yahua has agreed to take 120,000tpa of 6% lithium oxide spodumene concentrate from 2021 until 2025 on a take-or-pay basis.

This new deal supplements other supply agreements held by Galaxy. The first, with Japan’s Meiwa Corporation (part of the Mitsubishi group), provides for 55,000tpa until the end of 2022.

The second, with Yi Chun Yin Li New Energy of Jiangxi province covers 45,000t this year and 60,000t for each of 2021 and 2022.

Galaxy said the lithium market continues to experience an “extended period” of weak demand across the entire lithium value chain.

In order to maintain relationships with its long-term customers — who are also experiencing challenges in this market — Galaxy said it is fashioning its near-term sales volumes and shipping schedules to allow customers to work through existing inventory.

Sal de Vida moves to design phase

Meanwhile, a week ago, the company announced it had moved to the design stage at its Sal de Vida lithium brine project in Argentina.

The Perth-based miner also owns the James Bay lithium pegmatite project in Quebec province.