By Peter Milne
Australian minnow Liontown Resources has nabbed Elon Musk’s Tesla as a foundation customer for its WA lithium mine in a five-year deal that sent its share price soaring more than 15 per cent.
The deal comes just two months after Liontown raised $450 million to develop the Kathleen Valley lithium mine in WA’s Goldfields region.
Tesla will take lithium spodumene concentrate, an in-demand ingredient for making electric vehicle batteries, for five years from as soon as 2024.
Liontown chair Tim Goyder and chief executive Tony Ottaviano are riding a wave caused by car manufacturers dumping internal combustion engines.Credit: Liontown
The miner’s share price was up 15.5 per cent to $1.605 a share in early trading on Wednesday.
Korean battery manufacturer LG Energy Solution signed up in January as Liontown’s first customer.
Liontown managing director Tony Ottaviano said securing Tesla was a huge vote of confidence in the project. “This means that we now have two of the premier companies in the global lithium-ion battery and EV space signed up as foundational customers,” he said.
“We are also continuing to progress discussions with additional potential customers for the remaining available production, and we are looking forward to announcing additional arrangements in the weeks ahead.”
Both contracts have a pricing formula linked to the booming market where Australian spodumene that was sold for an average of $US400 a tonne in 2020 is now fetching $US2000 a tonne.
Tesla will take 100,000 tonnes in the first year and then 150,000 tonnes a year for the next four years.
Demand from vehicle manufacturers and their battery suppliers is driving the strong market. In 2020 Tesla predicted its demand for lithium in 2030 would exceed the production forecasts of the entire lithium mining sector.
Liontown plans to initially produce about 500, 000 tonnes of spodumene a year, expanding to 700,000 tonnes later.
The Tesla deal is conditional on Kathleen Valley starting commercial production by 2025.
Chairman Tim Goyder is seeking $121 million from banks to complete the funding required for the project. Liontown appears to be another success for Mr Goyder who founded Chalice Mining which is developing the Julimar copper and nicked mine in forests near Perth.
In December Mr Ottaviano said the cost to build Kathleen Valley had been hit by the tight WA labour market, which has been further squeezed by COVID-induced travel restrictions.
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