JOHANNESBURG (miningweekly.com) – Australian lithium developer Pilbara Minerals has entered into an offtake agreement with Global Advanced Metals (GAMG) for the sale of 100 000 lb of contained tantalum pentoxide-in-concentrates from its 100%-owned Pilgangoora lithium/tantalum project in Western Australia, over a two-year term.

The ASX-listed miner also entered into a mine gate sale agreement (MGSA) with Atlas Iron for the supply of direct shipping ore (DSO) from the project, whereby the company would deliver a minimum of one-million tonnes of unprocessed run-of-mine,based on a delivery schedule which is designed to allow Atlas to ship 100 000 t/m of DSO to off-take customers, starting in the June 2018 quarter

The GAMG offtake agreement covers a portion of the forecast tantalite production from Stage 1 of the Pilgangoora project in a lower-grade concentrate category, providing Pilbara with greater flexibility to sell this key by-product during the commissioning and ramp-up phase of the project

Pilbara MD Ken Brinsden said the company was pleased to have finalised a foundation sales agreement for its tantalite concentrate with one of the world’s leading suppliers and traders of tantalum products. “We are pleased to have GAMG as a foundation customer at Pilgangoora and we look forward to working with them as we complete construction, start commissioning and ramp-up production to deliver high-quality spodumene and tantalite concentrates to market as quickly as possible.”

Meanwhile, the company noted that its “innovative” MGSA and DSO arrangement with Atlas Iron would enable it to capitalise on current strong demand for lithium feedstock in the Chinese market and generate an early source of revenue and cash-flow from the project with minimal additional capital expenditure.

Atlas will use its existing processing and logistics infrastructure in the Pilbara to crush the material at its Mt Dove operations and ship the DSO to customers through its Utah Port shipping facilities in Port Hedland, under one or more offtake agreements to be entered into separately between Atlas and Sinosteel Australia and other potential off-take parties.

The overall agreement delivers an attractive fixed dollar base price per wet metric tonne of mine gate material sold, subject to adjustments in respect of the final product specifications shipped and the actual shipping costs realised. It is envisaged that the arrangement will deliver a healthy operating cash margin to Pilbara Minerals during the life of the DSO program.

Under the terms of the MGSA, Atlas will pay to Pilbara Minerals a mine gate commitment fee of $3-million to fund the company’s upfront establishment costs associated with the DSO program. This fee will be repaid by way of $500 000 offsets against the first six invoices issued to Atlas for material sales.

“The ability to generate early cash-flow is a significant bonus for any resource company in the commissioning and ramp-up phase, and this arrangement with Atlas allows us to leverage off Atlas’ established infrastructure and logistics chain to do so with minimal additional capital outlay,” Brinsden said.

As part of the DSO deal, Atlas and Pilbara have agreed to extend the deadline by which Pilbara is required to invest $1-million on exploration at the Mt Francisco project to October 2018. Pilbara purchased a 51% interest in the project from Atlas earlier this year.

Access agreements are targeted to be complete by approximately March 2018 with on-the-ground works commencing shortly thereafter. Drilling is expected to commence in the June 2018 quarter.