Alliance Mineral, Burwill Lithium reach new lithium offtake agreement

By IM Staff
Published: Thursday, 31 January 2019

Australian lithium producer Alliance Mineral has established a new offtake agreement and pricing strategy for spodumene produced at Bald Hill in Western Australia.

Hong Kong’s Burwill Lithium Co has agreed to transfer the rights and obligations of the long-term lithium offtake agreement it has with Australia’s Alliance Mineral Assets for the purchase of spodumene from its Bald Hill Mine in Western Australia  to China’s Jiangxi Bao Lithium Industrial, effective from January 14. 

As part of the new offtake agreement, the two parties have established a market-linked pricing mechanism with a $680-1,080 per tonne price range for minimum 6% lithium concentrate produced at the Bald Hill Mine. The agreement is for the period January 14, 2019, to December 31, 2022. 

Before the new agreement, the Bald Hill Mine production price was fixed for two years at $880 per tonne on an fob basis. 

If the parties do not agree on a specific price within the agreed range of $680-1,080 per tonne, the material will be purchased at the higher price of $880 per tonne on an fob basis or a floating price will be chosen. 

The pricing formula agreed will also be based on the lithium carbonate average monthly price until October-December 2019; after which both lithium carbonate and hydroxide prices will be used as price references. 

The remaining 18,000 tonnes of Bald Hill 2018 lithium spodumene production, which totaled close to 70,000 tonnes, will be sold to Jiangxi Bao Lithium at $880 per tonne on an fob basis.

Lithium carbonate price fluctuations in China over the past year led to lithium hard rock miners establishing floor and ceiling prices from which to base their spodumene price, to protect both producers and consumers from lithium price volatility. 

Lithium carbonate prices in China, which are typically used to calculate lithium spodumene prices, have fallen 50.31% between January 2018 and the start of 2019.

Seeking new offtake partner

Exclusivity and pre-emptive rights have been excluded from the new offtake agreement and Alliance is seeking a new offtake partner to purchase the remaining stage 1 and 2 lithium spodumene production. 

"We continue to see a high level of interest in the premium spodumene concentrate that Bald Hill produces, and this demand coincides well with our projected increases in lithium concentrate production from [the third quarter of] 2019," Calderwood said. 

Alliance Mineral aims to produce 65,000-80,000 tonnes of lithium spodumene between January and June 2019, having committed 80,000-100,000 tonnes of this material to Jiangxi Bao Lithium in 2019. 

The company also committed to supply 100,000-140,000 tonnes of lithium spodumene for each year from 2020 to 2022 to Jiangxi Bao Lithium, depending as well on the latter’s conversion capacity. 

Alliance Mineral expects to have combined production of 180,000 tpy of lithium spodumene concentrate, min 6%, from stage 1 and 2 of the project in 2019, rising to 240,000 tpy in 2020. 

The Bald Hill lithium-tantalum mine was previously jointly owned by Alliance Minerals and Tawana Resources. Alliance acquired all of Tawana’s share on December 4, 2018.

Australian lithium producer Aliance Mineral