Magnis share price rockets 23% on Tesla deal

The three-year offtake agreement is a big deal for this ASX small-cap lithium share.

| More on:
Man pointing at a blue rising share price graph.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Magnis share price is soaring on news it has signed a three-year offtake deal with Tesla 
  • Tesla has committed to purchasing a minimum of 17,500 tonnes per annum (tpa) with the option to buy up to 35,000 tpa 
  • The agreement is a big deal for the ASX small-cap lithium share 

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.

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.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in 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 Scott Phillips.

More on Materials Shares

A team of people giving the thumbs up sign representing APA and Wesfarmers doing a deal to study green hydrogen transport using an APA gas pipeline
Materials Shares

Why ASX 200 investors remain upbeat on Pilbara Minerals shares

Pilbara Minerals has some unique advantages over many rival ASX lithium miners.

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Materials Shares

This ASX lithium share is charging 13% higher on $825m financing update

This lithium developer is ending the week on a high. But why?

Read more »

a woman with her hands over her face splits her fingers over one eye so she can peep through them.
Materials Shares

Here's why Pilbara Minerals shares could crash 21%

Is this lithium miner destined to sink deep into the red? Here's what a leading broker thinks.

Read more »

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Materials Shares

5 reasons to buy Rio Tinto shares now

Goldman Sachs is feeling bullish about this mining behemoth.

Read more »

Worker in hard hat looks puzzled with one hand on chin
Earnings Results

Pilbara Minerals shares lower on disappointing half-year earnings miss

This lithium miner's earnings took a big hit during the first half.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Earnings Results

Mineral Resources share price drops on earnings decline and dividend crunch

This miner has been forced to slash its dividend during the first half.

Read more »

Miner and company person analysing results of a mining company.
Materials Shares

Rio Tinto shares fall on FY23 earnings decline and dividend cut

Investors have responded poorly to the miner's full year results.

Read more »

A couple sits on a sofa, each clutching their heads in horror and disbelief, while looking at a laptop screen.
Earnings Results

Pilbara Minerals share price on watch amid 78% half-year profit decline and no dividend

Weak lithium prices have weighed heavily on the company's profits.

Read more »