Offtake deal for Magnis Energy

Magnis Energy Technologies (ASX: MNS) shares are running hot on Monday after securing a binding offtake agreement with Traxys for the supply of natural graphite. 

Traxys is a global physical trader and merchant in metals and natural resources. Its logistics, marketing, distribution, supply chain management and trading activities span over 20 offices worldwide with annual turnover in excess of US$7bn. 

The agreement is for an initial six-year term and expected to commence in the second half of 2024. 

Traxys will purchase 50,000 tonnes of natural graphite concentrate (with varying specifications) within the first 12 months of the commencement date, scaling to 110,000 tonnes in each of the following 5 delivery years. 

“We have been keenly interested in the high purity graphite produced from Nachu for several years,” said Traxys Managing Director Kevin Smith, adding that “there has been huge demand from lithium-ion battery producers for all battery materials including graphite.” 

The offtake agreement is subject to precedents including the delivery of an updated Bankable Feasibility Study, project financing and government approvals in relation to the Nachu Graphite Project. 

Magnis must commence construction of the plant at Nachu prior to the end of Q3 2022. 

Paying for offtakes 

A potential red flag in this deal is that Magnis, as a producer, is paying Traxys an upfront fee for the offtake agreement.

It is understood that Magnis will pay Traxys an upfront marketing fee of 700,000 ordinary shares and 1.3m options, exercisable on or before the 24-months after issue at 60 cents each. 

The new shares and options will be subject to shareholder approval at the company’s next general meeting. 

Traxys is incentivised to sign the deal, receiving an immediate benefit for a future deal that is still subject to multiple hurdles and precedents.