The AVZ Minerals Ltd (ASX: AVZ) share price has been a positive performer on Monday.
In morning trade the lithium-focused mineral exploration company’s shares are up 7.5% to 21.5 cents.
Why is the AVZ Minerals share price charging higher?
Investors have been buying AVZ Minerals shares this morning following the announcement of a new offtake agreement.
However, rather than being a deal for its lithium product, this offtake agreement is actually for its tin concentrate.
According to the release, AVZ Minerals has signed a binding three-year offtake agreement for the sale of 600 metric tonnes per annum of tin concentrate to Kalon Resources. The pricing will be based on a formula linked to LME tin price. This represents ~43% of its expected tin concentrate production.
What is Kalon?
Kalon is a fully owned subsidiary of Noble Group Holdings. The release explains that it specialises in the physical commodity trading and supply chain management of industrial minerals and metals. This includes concentrates of tin, tungsten, niobium, tantalum, alumina, and aluminium. It also handles special ores such as chrome, manganese and iron ore.
Management notes that Kalon is a major participant in the tin market, handling several thousand tonnes of tin concentrate a year.
AVZ’s Managing Director, Nigel Ferguson, commented: “After an unexpected delay in finalising this contract, we are very pleased to have finally signed with Kalon, our first tin offtake agreement – just weeks after having signed our second lithium offtake agreement that cumulatively provides binding commitments for more than 50% of our saleable SC6 product.”
“Given the rising LME cash price of tin metal, up approximately 30% YTD, this offtake agreement is significant for the Manono Project and also significant given that Kalon is a considerable participant in the tin industry. While this agreement represents a relatively small, but growing portion of revenue for the Manono Project, it does confirm another large international business is willing to secure future supply from the project.”
“Similar to our recent lithium offtake agreements, this tin concentrate offtake agreement with Kalon will assist the Company in meeting certain conditions precedent which are required from our prospective financiers. Again we look forward to finalising some further offtake agreements for the remainder of the project’s products to satisfy some of the criteria our potential lenders have requested.”