The Magnis Energy Technologies Ltd (ASX: MNS) share price is soaring on news it has signed a three-year offtake deal with Tesla Inc (NASDAQ: TSLA).
The ASX lithium share opened at 49 cents, up 22.5% on Friday's closing price, and is now at 47.5 cents.
The lithium-ion battery technology and materials company requested a trading halt before the market open yesterday pending the announcement.
Image source: Getty Images
Small-cap ASX lithium share gets a big customer
Magnis has entered into a binding offtake agreement with Tesla for the supply of anode active materials (AAM) from February 2025.
Tesla has committed to purchasing a minimum 17,500 tonnes per annum (tpa) with the option to buy up to 35,000 tpa for a minimum three-year term at a fixed price.
The deal was signed over the weekend. It is conditional on Magnis securing a location for its commercial AAM facility by 30 June. It also has to start production at a pilot plant by 31 March 2024.
Production at the commercial facility needs to be underway by February 2025. The agreement is also subject to customer qualification.
This is big news for the ASX small-cap, with the company describing it as a "material transaction".
Magnis Chair Frank Poullas commented:
We are really excited to bring our high performing AAM to market that requires no chemical or thermal purification throughout the whole process, which differentiates this sustainable material in the market and provides great value to all parties."
What's next for the Magnis share price?
The Magnis share price has been rising, up 25% in the year to date following today's news. This compares to a 5.5% bump in the S&P/ASX All Ordinaries Index (ASX: XAO).
Magnis has commenced large-scale development of its pilot plants for both AAM and graphite concentrate from its Nachu mine in Tanzania. The company has ordered equipment and hired staff.
Next, it has to choose a location in the United States for the AAM commercial facility.
Meanwhile, the company needs to get its lithium materials certified by the United Nations for transport.
Last Friday, Magnis told investors there would be a delay in the certification due to a bad cell result.
Magnis has a 61% interest in the plant, which commenced commercial lithium cell production in August 2022. It began the process of securing independent certification from the UN late last year.
The independent certification process ensures that the batteries are safe to transport in large quantities by air, sea, rail, or road. The certification is based on international safety standards, including Standard UN38.3.
Certification will allow Magnis to ramp up the size of its sales.
In its statement, Magnis said all 10 cells submitted for UN certification had to pass and one cell failed.
The company said:
In one of the last tests performed, a cell reported an irregular result which has resulted in the process starting again with a new batch of cells.
In order to compress the timeline to achieve certification, additional accredited independent certifiers have been appointed.
The Magnis share price tumbled by 8% to 40 cents on the news.
