Liontown share price drops despite Tesla deal


teslaThe Liontown Resources Limited (ASX: LTR) share price is dropping on Monday morning.

At the time of writing, the lithium developer’s shares are down 3% to $1.23.

Why is the Liontown share price dropping?

The Liontown share price is on the slide on Monday morning after broad market weakness offset the release of a positive announcement.

According to the release, Liontown has completed negotiations with electric vehicle giant Tesla and executed a definitive full-form offtake agreement.

The agreement is for the supply of spodumene concentrate from the company’s flagship 100%-owned Kathleen Valley Lithium Project in Western Australia.

Liontown will supply up to 150,000 dry metric tonnes (dmt) per annum of spodumene concentrate, which represents approximately one-third of the project’s start-up production capacity of ~500,000 tonnes per annum.

The release explains that supply is expected to commence in 2024 and the offtake agreement is conditional upon Liontown commencing commercial production at Kathleen Valley no later than 1 December 2025.

This deal complements the company’s existing agreement with LG Energy Solution. That agreement is for the supply 100,000 dry metric tonnes in the first year, increasing to 150,000 tonnes per year in subsequent years.

Pleasingly, another deal may not be far off. Liontown revealed that it has received very strong interest from a range of parties for the remaining third offtake.

Once this is complete, it will result in approximately 85% of the production from Kathleen Valley being contracted. The remaining production will be sold on spot or to existing customers.

‘A tremendous achievement’

Liontown’s Managing Director and CEO, Tony Ottaviano, was pleased with the deal. He said:

We are pleased to have concluded negotiations with Tesla allowing us to execute our second full form Spodumene Concentrate Offtake Agreement. Tesla is a global leader and innovator in electric vehicles and having formalised arrangements for it to become a significant customer is a tremendous achievement.

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, marking a significant step towards realising our ambition to become a globally significant provider of battery materials for the clean energy market.

The post Liontown share price drops despite Tesla deal appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Scott Phillips.

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