The Liontown Resources Limited (ASX: LTR) share price is defying the market weakness and racing higher.
In morning trade, the lithium developer's shares are up 17% to $1.25.
Why is the Liontown share price racing higher?
Investors have been bidding the Liontown share price higher today after the company provided an update on an offtake agreement.
According to the release, the company has secured a third foundational offtake agreement with leading global automaker Ford.
The release explains that Ford and Liontown have executed a definitive binding full-form offtake agreement for the supply of up to 150,000 dry metric tonnes (dmt) of spodumene concentrate per annum for an initial term of five years. This will start from the commencement of commercial production in 2024.
Funding agreement and final investment decision
In addition to the offtake agreement, Ford and Liontown have executed a binding full-form funding facility agreement.
The two parties have agreed to $300 million debt facility that will be used for the development of the Kathleen Valley Lithium Project.
Management notes that this funding facility, together with the proceeds from Liontown's $463 million capital raise in December, paved the way for the project's approval by the board today.
One slight negative, though, is that the capital cost of the project is expected to be greater than previously forecast.
Instead of $473 million, the cost is expected to be $545 million. Management advised that this increase is driven primarily by optimisation and expansion of the FEED scope across a range of areas and general cost escalation.
Though, this could still change. The release notes that this is the company's current best estimate. Liontown continues to tender and award major construction, equipment, and operational packages of work.
'A momentous milestone'
Liontown's managing director and CEO, Tony Ottaviano, was delighted with the agreements. He commented:
The signing of our third and final foundational offtake agreement is a momentous milestone for Liontown and the Kathleen Valley project, with approximately 90% of Kathleen Valley's start-up capacity now under secured long-term binding offtake agreements.
Our disciplined approach to our offtake strategy has enabled us to build a customer base of Tier-1, globally significant customers in the EV battery supply chain, validating Kathleen Valley's status as a globally relevant lithium asset.
In addition to the offtake, the A$300 million funding facility from Ford, together with the capital raised last year, means that we have secured commitments for the funds required to support the full commercial development of Kathleen Valley through to first production.
Ford's vice president of EV Industrialization, Lisa Drake, believes these agreements will help the automaker reach its bold electric vehicle goals. She commented:
Ford continues working to source more deeply into the battery supply chain to meet our goals of delivering more than 2 million EVs annually for our customers by 2026. This is one of several agreements we're working on to help us secure raw materials to support our plan to deliver EVs for customers around the world and meet our environmental, social and governance commitments.
