Why the European Lithium (ASX:EUR) share price is rocketing 9%

What did the miner announce?

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The European Lithium Ltd (ASX: EUR) share price is surging during early afternoon trade on Wednesday. This comes after the company announced it has agreed to pursue a cooperation and offtake partnership with an international commodities merchant.

At the time of writing, the lithium miner’s shares are up a sizeable 9.52% to 11.5 cents. It’s worth noting, however, that despite the strong gains, its shares are still down 14.8% in a month.

Why is European Lithium shooting for the stars?

Investors are driving up the European Lithium share price following upbeat sentiment on the company’s potential commercial opportunities.

According to its release, European Lithium advised it has signed a multi-tiered non-binding memorandum of agreement (MOA) with Traxys.

This sets up the future supply of lithium hydroxide (LiOH) from European Lithium’s Wolfsberg Project in Austria.

Under the terms, Traxys will retain exclusivity until the end of the first quarter of 2022. This will allow it to finalise the offtake agreement with the miner.

Traxys will also provide support in securing working capital and other project financing facilities for the development of the Wolfsberg Project. So far, the physical commodity trader and merchant has introduced European Lithium to financial institutions in relation to project finance. This has led to the opening of direct communications between European Lithium and the potential lenders.

Furthermore, discussions are being scheduled regarding a potential investment by Traxys for the commercialisation of the Wolfsberg Project.

European Lithium chair Tony Sage said:

Finalising an offtake agreement is another key milestone for the Company and will add to recent developments at the Wolfsberg Project. In the current high lithium price environment, partnering with Traxys and leveraging their expertise will achieve the best result for shareholders while the company retains flexibility.

About the European Lithium share price

In the past 12 months, the European Lithium share price has boasted a gain of around 140% from continued positive investor sentiment. The company’s share price charged higher in early November following a resource re-estimation of the Wolfsberg Project.

Based on today’s price, European Lithium has a market capitalisation of around $124.25 million, with roughly 1.08 billion shares outstanding.

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Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

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