The shares of Pilbara Minerals Ltd (ASX: PLS) came out of a trading halt with a bang today, jumping around 15% higher following the announcement of binding off-take and downstream processing agreements.

According to the ASX release some agreements have been signed with a leading Chinese lithium chemicals company for the supply of 140,000 tonnes pa of 6% chemical grade spodumene concentrate over a six-year period from Q1 2018. The contract comes with the option to extend it for a further four years.

The unnamed Chinese lithium chemicals company is a leading producer of lithium carbonate and lithium hydroxide monohydrate. It is also a key supplier of lithium products and materials to China’s rapidly growing lithium-battery industry.

It will be the Australian lithium developer’s first major binding off-take agreement for its 100%-owned Pilgangoora Lithium-Tantalum Project in Western Australia and represents 40% of the project’s estimated annual output.

Furthermore, a binding memorandum of understanding has been executed with the Chinese company to participate in the development of a future offshore spodumene conversion plant in order to process spodumene concentrates from the Pilgangoora project.

Management advised that Pilbara Minerals expects to have a 50% share of the equity in the proposed joint venture. Should the joint venture proceed it believes Pilbara Minerals will be positioned higher up the lithium value chain, making it a superior vertically integrated company in the high-growth global lithium industry.

The final part of the agreement sees the Chinese company invest $17.7 million into Pilbara Minerals through a 3% placement at 50 cents per share. This is due for settlement after all conditions of the off-take agreement terms have been satisfied. The Chinese company will be given the option to increase its stake to 5% once a formal investment decision has been made with regards to the development of the lithium chemicals facility.

I believe today’s announcement is very positive and makes Pilbara one of the more attractive lithium investment options on the Australian Stock Exchange alongside peers Orocobre Limited (ASX: ORE) and Galaxy Resources Limited (ASX: GXY).

Many expect the lithium price to keep on climbing, with the increased use of lithium batteries in smart phones and cars expected to drive demand over the next decade. If this does in fact happen then Pilbara Minerals could be in a great position to make bumper profits.

Foolish takeaway

An investment in lithium developers is largely speculative, but I feel those that are looking at designating a small portion of their portfolio to the industry could do a lot worse than Pilbara Minerals.

Finally, Pilbara Minerals shares are now up 5,750% in the last three years. That would have turned a $10,000 investment into a huge $585,000. Sadly that ship may now have sailed, but here's how this person was able to turn a $10k investment into over $8 million.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.