MELBOURNE – Shares of battery and technology metals developer Australian Mines Ltd surged on Tuesday after the company signed an offtake agreement with South Korean battery maker SK Innovation for nickel and cobalt from its Sconi project.
The commodity off-take agreement, which is for an initial period of seven years, is for SK Innovation's newly developed battery manufacturing plant in Hungary and Korea.
SK Innovation said prices for both metals have been rising, with cobalt prices affected by political tensions in the Democratic Republic of Congo (DRC), the source of most of the world's supplies.
"We signed the deal to minimise supply volatility and the long-term supply contract is a way to ensure stable supplies," an SK Innovation spokesman told Reuters.
Australian Mines, which has been on a trading halt since last trading on February 9, said on Monday the agreement included an option for SK Innovation to buy up to 19.9 percent of its ordinary shares.
Its shares jumped over 60% at the start of trade on Tuesday and were last up 40% at A$0.13 a share, valuing the company at about A$340-million.
The agreement is conditional on Australian Mines obtaining finance for the Sconi project in the country's far north east by the end of 2018, with mining to start by the end of 2020, the company said.
SK Innovation will take all of the nickel and cobalt from the Sconi mine, it added.
Australia, home to the world's second-biggest cobalt reserves, is seeing a rush of interest in projects still years from production as electric vehicle battery makers seek supplies from a more costly but less risky source than the DRC.
SK Innovation said in November it will invest 840.2-billion won ($777-million) to build an electric vehicle battery plant in Hungary to meet demand from automakers in Europe.