Suvo Strategic Minerals Limited (ASX: SUV) has signed a major take or pay Offtake Agreement with China’s Chaozhou Chengcheng Industrial Co.,Ltd.
Executive Chairman Henk Ludik said that bolstering the company’s earnings, this is a major supply agreement for the company covering a minimum order quantity of 4,275 tonnes over a three-year term.
The hydrous kaolin to be supplied under this Agreement will primarily be used in the inks and pharmaceutical sectors, with the contract valued at between ~A$3.25 million to A$3.50 million, depending on delivery location and a forecast exchange rate of USD: AUD 0.64:1.
Under the terms of the contract, Chaozhou must either pre-pay for the goods upon issuance of a Purchase Order to Suvo, or by draw-down by Suvo via a letter of credit provided by Chaozhou to Suvo.
Mr Ludik said an Offtake of this size is in line with the company’s growth strategy and current upgrade of its Pittong plant. Further, the security provided via the offtake terms requiring prepayment/ability to drawdown from a letter of credit will provide a significant boost to the company’s cashflow and increase the weighted average value of products sold from Pittong. Importantly it paves the way for one of the main strategic focuses of the Company at present, which is to continue to diversify the company’s product basket, with a focus on premium end markets such as the inks, cosmeceutical and pharmaceutical sectors.
Commercial-scale trials with C&D continue
A second legally binding supply contract has now been executed with C&D for the delivery of an additional 80 tonnes (5 x 16 tonne containers) of Pittong hydrous kaolin product to be further used in the next round of commercial-scale trials. Of importance, the product supplied under this agreement is earmarked for the inks sector, which commands a pricing premium.
The original cooperation agreement dated 25 May 2022 between Suvo and C&D set out terms for the Companies cooperation agreement focussing on the development and growth of ‘other kaolin related product’ markets utilising Pittong Kaolin, with a view to developing long-term relationships with customers across a range of industries, products and locations.
In August 2022, C&D and Suvo signed a legally binding supply contract for the delivery of 20 tonnes of two Pittong hydrous kaolin products for use in commercial- scale trials. Suvo is happy to confirm this product has arrived in China with lab- scale testing advancing.
These binding contracts are an important next step, bringing Suvo closer to a commercial offtake agreement with C&D, which is the minerals division of Xiamen C&D — a Global Fortune 500 (Top 100) company with annual revenue circa US$100 billion.
Pending the results of these commercial-scale trials, Suvo and C&D will continue to negotiate a Sales and Purchase Agreement in good faith.
Pittong Plant Upgrade and Optimisation
As announced in August 2022, the Pittong plant upgrade and optimisation review was completed.
The independent review confirmed the plant capacity expansion will be capable of delivering a name plate processing capacity of ~60,000 tonnes per annum under certain operating conditions, with a forecast completion date of end Q1 CY 2023.
At completion, Pittong is expected to produce ~50,000 tonnes per annum of hydrous Kaolin, which represents an 83 per cent utilisation, based on the company’s proposed operating hours.
The company is pleased to confirm the upgrade and optimisation project is tracking on schedule and on budget. Certain key equipment has been installed, commissioned, and working as intended, with the remaining equipment ordered and expected to arrive in the coming months.
The company has also made key management level appointments on site and is continuing an aggressive recruitment strategy to fill the remaining roles and ensure the plant is capable of operating 24/7, which is a condition required to achieve the name plate processing capacity.
“We are pleased to provide confirmation that the upgrade and optimisation of the Pittong operations is on budget and on schedule for commissioning in Q1 CY23,” Mr Ludik said.
“The commissioning date is aligned to the ongoing increase in off-takes for our premium hydrous Kaolin product set. Both the new contract with Chaozhou and the expanded trial contract with C&D supports Suvo’s commitment to sell new volumes from the upgraded operations into the premium market.”
For further information please visit: https://suvo.com.au/
