The company has signed a two-year offtake agreement with Shandong Ruifu for the early supply of direct shipping ore from Pilgangoora, or the newly acquired Lynas Find project next door.
Starting as early as July 2017, Pilbara will supply Shandong with 1.9 million tonnes (100,000 tonnes per month) of crushed, but unprocessed, run-of-mine product grading 1.5% lithium oxide and having a 5% moisture level at an “attractive” fixed price per tonne in US dollars.
The agreement includes a $US10 million cash pre-payment to be provided by Shandong, and the two companies will also negotiate a further offtake for Pilgangoora spodumene concentrate.
Pilbara managing director Ken Brinsden said the agreement provided multiple benefits for both parties.
“The delivery of early run-of-mine ore to interim processing facilities in China represents a fantastic innovation for the lithium industry, providing earlier access to raw material for our customer while at the same time supporting Pilbara’s fast-track development strategy by providing early cashflows from the project,” he said.
“This will provide the opportunity to mobilise the mining fleet earlier than had been otherwise planned, accelerate the development of the open pit, construct the tailings facility and prepare the ore stockpiles for subsequent process plant commissioning.”
The deal will also provide the company with revenue during the critical commissioning phase, due for late next year.
“Importantly, the delivery of early run-of-mine ores will not impact the delivery of the overall 2 million tonne per annum ore processing and spodumene concentrate plant, as presented in our recent DFS study release,” Brinsden said.
The $A214 million Pilgangoora project has a post-tax net present value of $709 million, based on a 2Mtpa operation over a 36-year mine life to produce an average of 314,000 tonnes of 6% spodumene and 321,000 pounds per annum of tantalite.
“Pilbara remains on track for commissioning of the full mine site facilities from late 2017, establishing the company as a leading low-cost supplier of spodumene concentrate to global markets,” Brinsden said.
“It is also worth noting that the attractive pricing and terms we have achieved, including the ability to ship run-of-mine ore to China for further processing are indicative of the very strong demand for lithia raw materials in China as the chemical conversion industry seeks security of raw material supply over the coming years.”
Pilbara is advancing financing for the project ahead of the start of full construction in early 2017.
Pilbara shares jumped by more than 10% to 52.5c.
