African lithium developer Prospect Resources (ASX: PSC) has secured global industrial minerals solutions company Sibelco NV as a long-term offtake partner for the ultra-low iron petalite to be produced from its Arcadia project in Zimbabwe.
The seven-year agreement is for up to 100,000 dry metric tonnes per year – or up to 700,000dmt over the term of the contract – of high quality concentrate, grading 4.1% lithium oxide and 0.05% ferric oxide.
Prospect may terminate the contract if Belgium-based Sibelco does not purchase at least 10,000t of product in each of two successive quarters for any reason other than that the global market price for petalite is below an agreed price level.
In turn, Sibelco may terminate the contract if Prospect does not meet agreed production levels of product for two successive quarters.
Pricing formula for the agreement is linked to end-customer sales contracts, and the companies have agreed to set binding delivery quantities, pricing and end-customer contract terms on an annual basis, to cover the following year.
The offtake agreement is expected to account for total production volumes from the first seven years of the Arcadia project, as outlined in the project’s 2019 updated definitive feasibility study which indicated a base case 2.5Mt per annum development.
Prospect managing director Sam Hosack said securing a large customer with a global focus was a coup for the Perth-based company.
“Sibelco is the largest distributor of ultra-low iron petalite in Europe and possibly the world, and we believe this is the largest offtake agreement of its kind ever signed,” he said.
“It is a significant ‘blue chip’ European customer [and will feed from] a project we expect will become the largest ultra-low iron petalite producer in the world.”
Arcadia is considered to be Africa’s most advanced lithium project and a critical asset to the long-term global supply of lithium.
According to the 2019 updated definitive feasibility study, the project is expected to be a strong, high-margin development with a current forecast mine life of around 15.5 years, life-of-mine revenue of approximately $4.75 billion and average annual earnings before interest, tax, depreciation and amortisation of $158.5 million.
Prospect aims to maximise spodumene sales from Arcadia into the chemical (battery) market, and ultra-low iron petalite sales into the premium technical (glass and ceramics) sector, with the intent that all products be marketed under long-term offtake agreements.
“This DFS positions [us] to secure a key role in the expanding global lithium market and validates my belief that Arcadia is Africa’s leading lithium project with respect to its scale, grade, economics and management team,” Mr Hosack said in December.
“We are excited by the opportunity to capitalise on the strong fundamentals of the lithium market, particularly the unique ability to supply the glass and ceramics market with technical grade ultra-low iron petalite.
“While the battery market is a key driver of lithium demand, we remain focused on glass and ceramics market and seek to position Arcadia as a significant, consistent and reliable high-quality supplier, thereby accessing the premium prices available in this market.”