Giddy up: Core Lithium (ASX:CXO) share price races 11% higher on Tesla deal

This ASX-listed lithium company just landed a big deal…

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Key points

  • The Core Lithium share price is trading 11% higher on Wednesday following its latest announcement 
  • Tesla and Core Lithium have entered a binding term sheet for the supply of 110,000 tonnes of spodumene concentrate over four years 
  • Subject to further agreements, Tesla will assist Core Lithium in its potential stage 3 expansion 

It is an exciting day for the Core Lithium Ltd (ASX: CXO) share price after announcing an agreement with Tesla Inc (NASDAQ: TSLA).

Jumping out of the chutes, shares in the lithium-focused minerals explorer are trading 11% higher at 92 cents apiece. The move follows a bumpy past month for the Core Lithium share price, bouncing between 75 cents and 87 cents per share.

Supplying the world's largest EV company

Investors are flocking to Core Lithium on the ASX today after revealing it has entered into an agreement with US-based electric vehicle manufacturer, Tesla.

According to the release, the two companies executed a legally binding term sheet for the supply of lithium spodumene concentrate. Additionally, the supply agreement is for 110,000 tonnes of concentrate across a four-year period.

In terms of pricing, the announcement notes that the 'market price' will be referenced. However, the term sheet also includes a price floor and ceiling.

Core Lithium will source this supply from its Finniss Lithium Project, which is located near Darwin Port. In September 2021, the company made its final investment decision on the project and has since commenced construction.

Subsequently, this term sheet will be subject to the execution of a definitive product purchase agreement by 27 August 2022. Currently, this additional agreement is for Core Lithium to kick off its supply to Tesla before 31 July 2023.

At this stage, the Aussie lithium producer is expecting production to be rolling in Q4 2022. An extension to the supply deadline can be made through mutual agreement if delays were to occur.

Managing director of Core Lithium, Stephen Biggins, commented on the milestone. He said:

Core Lithium is thrilled to have reached this agreement with Tesla and look forward to further growing this relationship in the years to come. Tesla is a world leader in electric vehicles and its investment in offtake and interest in our expansion plans for downstream processing are very encouraging.

What else is moving the Core Lithium share price?

Another facet of today's announcement could be drumming up support for the Core Lithium share price. While it is also subject to a definitive agreement, Tesla has agreed to assist with the ASX-listed company's potential stage 3 expansion.

In short, Core Lithium has longer-term plans to develop downstream lithium chemical processing within the Northern Territory.

Tesla would then incorporate Core's lithium chemical product into its supply chain.

Motley Fool contributor Mitchell Lawler owns Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Tesla. 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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