The Core Lithium Ltd (ASX: CXO) share price jumped 11.5% after its largest shareholder and Tesla supplier plans to double production
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The Core Lithium Ltd (ASX: CXO) share price has surged 11.50% this afternoon to 29 cents. This comes after its largest shareholder and key Tesla (NASDAQ: TSLA) supplier, Yahua, announced plans to more than double its lithium hydroxide output.
At the time of writing, the Core Lithium share price has retreated slightly, trading for 28 cents, up 9.62%.
Core Lithium rides renewables hype
Yahua announced this week that it plans to increase its output from 20,000tpa to 50,000tpa of battery-grade lithium hydroxide.
Yahua and Tesla previously signed an agreement in December 2020. The agreement stated that Tesla will purchase between US$630 million to US$880 million of battery-grade lithium hydroxide. This will occur over a five-year period.
Core Lithium has also positioned itself as a key supplier of Yahua’s lithium concentrate. The company has signed a binding offtake agreement to supply 75,000tpa of lithium spodumene concentrate. This offtake agreement represents approximately 40% of Core Lithium’s flagship Finniss’ project’s proposed 175,000tpa production.
According to the company’s 2020 annual report, Core Lithium believes its collective offtake agreements have secured approximately 85% of its first three years of annual spodumene production. Alongside Yahua, Core Lithium has signed non-binding offtake agreements with Transamine.
Transamine is a Swiss-based trading company looking to secure 50,000tpa and negotiate offtake agreements with China’s Xinfeng for an annual supply of spodumene concentrate.
Share price snapshot
The Core Lithium share price hasn’t quite surged into new highs like Galaxy Resources Ltd (ASX: GXY) and Pilbara Minerals Ltd (ASX: PLS). However, looking at the bigger picture, its shares jumped from just 5 cents in November 2020 to highs of 42 cents by mid-January 2021.
After surging some 700% in a matter of months, its shares have cooled down. Bouncing between the mid 20 cents level. The soon-to-be lithium producer has focused on kicking goals to bring its Finniss project online.
The company is currently working through the completion of the Finniss Lithium project concentrate definitive feasibility study. In addition to finalising live off-take negotiations ahead of reaching a final investment decision in 3Q21.
Should all things go to plan, construction will begin later this year.
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Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.