Chinese automotive manufacturer Great Wall has secured an offtake agreement with Western Australian mining company Pilbara Minerals Limited to sure up lithium supply for their electric car range.
The 28 million dollar (21.95 million U.S. dollars) deal signed on Thursday evening means the car giant will take a 3.5 percent stake in the company and provide around 50 million dollars in debt funding.
Currently, the Pilgangoora operation has a capacity of around 2 million tons of lithium per year, but the new deal should see the figure lift to in excess of 5 million tonnes.
"This is great news for the company," CMC Market's chief market strategist Michael McCarthy told Xinhua on Friday.
"This investment will help underpin the development of what has been a very underutilized asset for them, previously their focus has been on tantalum."
"At the moment their share price has spiked 11.5 percent to 0.62 cents per share, so clearly the market is viewing this as a positive for the company."
McCarthy expects the resource industry down under will see more of these kinds of agreements as international manufacturers look to deal more directly with material suppliers.
"Now it's becoming clearer just how big this story could be, people are realizing they have to invest in what is happening in the raw material supply chain," managing director of Pilbara Minerals Ken Brinsden told local media.
"If you take a look across the lithium world, two things are becoming clearer to the industry as a whole."
"Firstly, on the supply side, the raw materials are not coming online as quickly as many had assumed and secondly, the demand growth is much bigger than people had previously assumed."
Producing over 1 million cars per year, Great Wall are looking to developing 500,000 electric hybrid cars in the next five years as China looks to transition away from petroleum fueled vehicles.
