Australian Mines signs nickel-cobalt offtake agreement with LG Energy Solution

Australian Mines (ASX: AUZ; US-OTC: AMSLF) has announced an offtake agreement with South Korea battery manufacturer LG Energy Solution for mixed nickel-cobalt hydroxide from its 100%-owned Sconi project in North Queensland.

The mixed hydroxide precipitate (MPH) contains both nickel and cobalt and is an intermediate product that can be used in lithium-ion battery production.

Under the agreement, LG Energy Solution will receive 71,000 tonnes of nickel and 7,000 tonnes of cobalt for a six-year period starting in 2024. The deal is contingent on Australian Mines securing financing by June 2022 to build Sconi.

The binding offtake agreement also includes an option to extend the agreement for another five years.

The quantity of metal supplied under the deal would produce batteries that can power 1.3 million electric vehicles, LG Energy Solution estimated in a press release.

The Sconi project, about 250 km from Townsville, is forecast to produce about 46,800 tonnes of nickel sulphate and 7,000 tonnes of cobalt sulphate a year over an estimated mine life of 30 years.

A bankable feasibility study completed in 2019 outlined capex of US$974 million (including US$110 million for contingencies) and operating costs of about US$1.46 per lb. nickel.

The study forecast a post-tax net present value at an 8% discount rate of $817 million and a post-tax internal rate of return of 15%, and a post-tax payback period of 5.8 years.

LG Energy Solution emphasized that Sconi will use dry stack tailings, describing the process as “an eco-friendly method used to store filtered tailings,” and one that “avoids the possibility of dam failure and long-term storage issues.”

“Although more costly, compared to the conventional method due to construction and maintenance expenses, the dry stacking method is deemed an environmentally friendly way to extract raw materials,” it stated in the press release.