NextSource Materials (NEXT.TO) had good news last week as it announced it signed a binding (!) offtake agreement with an unnamed party described as a ‘prominent Japanese Graphite Trading Company’. The latter will purchase 20,000 tonnes of SuperFlake graphite per year from NextSource’s Molo project, for a period of 10 years.The primary customer of the Japanese graphite trader is ‘major global battery anode material manufacturer’, which has already cleared the use of the Molo graphite in the batteries in the batteries for its automotive customers. NextSource has been quiet in the past few months and quarters, and now we understand why. Being able to sign an important agreement with a major trading house after receiving the stamp of approval is an incredibly important step forward for NextSource.
This appears to be just the start of an interesting relationship as NextSource is now discussing potential additional collaborations on a supply chain and partnering level. NEXT is mainly mentioning figuring out if the company could be in a position to produce value-add products like spherical and purified graphite. We wouldn’t be surprised if NextSource would also bring up the Green Giant vanadium project in those discussions as once the graphite mine is up and running, the Green Giant project could be NextSource’s next step to create value.
Signing a binding offtake agreement with a respected counterparty before the first tonne of graphite even gets produced is a major achievement for NextSource. Additionally, this order of 20,000 tonnes per year is larger than NextSource’s planned output of 17,000 tonnes per year in the first phase of its project development plans. As such, the company is already exploring to immediately start Molo at a higher production rate, which could result in unlocking additional economies of scale. Fortunately NextSource doesn’t have to deliver 20,000 tonnes per year right away, as the agreement includes a ramp-up period and a provision that allows NextSource to spend three years before the commercial operations start.
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