Century Lithium Corp. (CYDVF/$0.22 | Price Target: $2.3) Century Lithium Corp. (CYDVF/$0.22 | Price Target: $2.3)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Setting the Stage for an Anchor Sodium Hydroxide Off-take Agreement
Rating: OUTPERFORM
Paving the way for an off-take agreement. Century Lithium recently executed a non-binding memorandum of understanding (MOU) to formalize a multi-year off-take agreement with Orica Specialty Chemicals to purchase sodium hydroxide from Century Lithium’s wholly owned Angel Island project. Orica is a leading mining and infrastructure solutions provider, the largest producer of sodium cyanide, and a supplier of specialty mining chemicals to Nevada’s mining industry.
Initial term of five years. The contemplated off-take agreement will have an initial term of five years and a right of first offer for an additional five years. It would account for a large portion of the surplus sodium hydroxide produced during the early years of the Angel Island project's operation. A definitive agreement will contain pricing terms.
Sodium hydroxide sales offset project operating expenses. Century Lithium’s patent-pending process for extracting lithium from the claystone at Angel Island combines chloride leaching with direct lithium extraction and uses salt in the form of solid sodium chloride or saline brine to make reagents. In addition to lithium, the process produces surplus sodium hydroxide, the sales of which offset cash operating costs and support low operating costs for Angel Island’s primary lithium carbonate product.
Rating is Outperform. In our view, the agreement with Orica affirms the marketability of Century’s sodium hydroxide product, establishes a potential anchor off-take partner, and supports the project’s operating cost assumptions. Century has been evaluating various opportunities to further drive reductions in Angel Island's estimated capital and operating costs, including considering a more efficient phased design which could reduce capital costs. We think the agreement with Orica could provide a catalyst for securing strategic financing partners. On the permitting front, we think Century could commence National Environmental Policy Act (NEPA) permitting as early as June.