Core Lithium shares hit all-time high on Tesla supply deal

The narrative behind Australia’s next lithium producer, Core Lithium (ASX: CXO), just got a little bit sweeter after signing a supply agreement with Tesla. 

Key highlights for the agreement include:

• Term sheet subject to parties completing negotiations and execution of a definitive product purchase agreement by 27 August 2022 

• Supply expected to commence before 31 July 2023 

• Tesla will buy up to 110,000 tonnes of spodumene concentrate over four years 

On the verge of producer status 

Core Lithium is fully funded to deliver its flagship Finniss Project. Construction has already commenced and first lithium concentrate production is scheduled for the fourth quarter of 2022. 

According to Core Lithium’s Stage 1 Definitive Feasibility Study (DFS), the project is expected to have an annual production of circa 175,000 tonnes of spodumene.

Core Lithium Stage 1 DFS Summary (Source: Core Lithium)

By that measure, the Tesla agreement covers roughly 16% of annual output. 

Poised for growth 

Core Lithium has been posturing for a Stage 2 expansion for the Finniss Project, which has a mine life of just 8 years.

Recent initiatives to drive resource and mine life growth include: 

• Acquisition of six highly prospective mining leases located adjacent to Finniss 

• Expanded exploration and resource drilling campaign to recommence and ramp-up in the second quarter of 2022 

In addition, investors should expect additional drill assay results from the company’s 2021 drilling campaigns to be reported in the coming weeks.

The results were delayed due to issues surrounding laboratory productivity. 

Stage 3 expansion on the cards

In addition to the Tesla announcement, Core said its strategy for Finniss currently includes a potential Stage 3 expansion. 

“Stage 3 is based on a longer-term plan for the development of downstream lithium chemical processing in the Northern Territory,” said the announcement. 

This suggests plans to convert spodumene into lithium hydroxide.

Tesla has agreed, subject to the definitive supply agreement, to provide additional support to assist Core with its Stage 3 expansion plans, including incorporating the downstream product into Tesla's supply chain.