One of the best performers on the Australian share market on Friday has been the Altura Mining Ltd (ASX: AJM) share price.
In morning trade the lithium miner’s shares are up a massive 33% to 24 cents.
Why are Altura Mining’s shares rocketing higher today?
This morning Altura Mining announced that it has signed a binding offtake agreement with GFL International Co., Limited, a wholly owned subsidiary of leading global lithium producer in Ganfeng Lithium.
According to the release, the new agreement diversifies its customer base and locks in 100% of planned production from its recently commissioned flagship Altura Lithium operation in Western Australia.
The agreement also provides GFL with the option to increase supply through access to 50% of Altura Mining’s Stage 2 expansion production from the Altura Lithium operations.
GFL has committed to a minimum of 70,000 dmt per annum of 6% grade spodumene concentrate at a minimum price of US$550 dmt. It will also make an US$11 million pre-payment on 2019 shipped cargoes.
In addition to this deal, Altura has reached an agreement with existing offtake partner, Shaanxi J&R Optimum Energy, which will reduce its current binding offtake agreement commitment from a minimum of 100,000 tpa to a minimum of 50,000 tpa from 2019 onwards.
Management believes this will provide the company with more flexibility as Shaanxi J&R Optimum Energy concludes its restructuring.
Altura’s managing director, James Brown, was happy with the agreements and believe they will “underpin production and should remove any offtake uncertainty.”
I think this announcement will have come as a major relief to shareholders. Not only were there concerns over Shaanxi J&R Optimum Energy’s ability to fulfil its original offtake agreement, the company’s dwindling cash balance had many predicting that a capital raising was coming.
And while I wouldn’t rule one out just yet, the US$11 million pre-payment will certainly help with working capital.
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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. 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 Scott Phillips.