Vulcan Energy Resources Ltd (ASX: VUL) shares are catching the eye on Monday.
In morning trade, the ASX lithium stock is down 7% to $6.30.
Why is this ASX lithium stock falling?
The catalyst for today's move has been broad market weakness following a selloff on Wall Street which has offset the release of a big announcement from the lithium developer.
According to the release, the ASX lithium stock has signed an offtake agreement with a wholly owned subsidiary of Glencore (LSE: GLEN) to provide battery-quality lithium hydroxide monohydrate (LHM) from its Phase One Lionheart Project.
Glencore is one of the world's largest natural resource companies headquartered in Switzerland. It produces and markets more than 60 commodities.
The Phase One Lionheart Project will have the capacity to produce 275 GWh of power, and 24,000 tonnes of LHM, which is enough for approximately 500,000 battery electric vehicles per year.
According to the release, Glencore has signed a binding offtake agreement for between 36,000 tonnes and 44,000 tonnes of LHM over the duration of an initial eight-year period.
It is in good company. The ASX lithium stock highlights that Glencore joins Stellantis, Umicore, and LG Energy Solution as offtake partners for phase one. Importantly, it represents the final offtake agreement required for project financing.
The company notes that all agreements are binding, take-or-pay, and with agreed pricing mechanisms across six to ten years duration. The pricing mechanisms are a basket of fixed, floor-ceiling and index-based floating prices during the proposed debt payback period.
In addition, the agreement with Glencore offers the possibility of a European partnership for end users. It notes that there are discussions with other potential customers, including German and European automakers, who have expressed an interest in taking further volumes from Phase One.
What's next?
It is now aiming to finalise its phase one financing package, together with project and financing agreements, in the current quarter, before commencing construction of the commercial plants.
Vulcan Energy's managing director and CEO, Cris Moreno, commented:
We welcome the start of a long-term relationship with Glencore. With this agreement- a key requirement for Phase One financing – Vulcan has now achieved a good mix of offtake partners for Phase One lithium production: an automaker, a battery maker, a cathode manufacturer, and a commodities trader, all with a strong European focus. The agreement also gives Vulcan the flexibility to bring in further European customers in the future, while also utilising Glencore's expertise in this market, which is a value-add to Vulcan.
Glencore's head of lithium, Robin Francois, adds:
We are pleased to partner with Vulcan to help support the development of the German and wider European lithium supply chain. This new agreement with Vulcan will further expand our lithium portfolio and reinforce our position as one of the leading suppliers of battery raw materials.
