Prospect Resources says it will miss its deadline to reach a petalite offtake agreement with Belgium’s Sibelco, one of the world’s largest glass-ceramic manufacturers.

In April, the two companies signed an MoU to work on a possible offtake agreement for ultra-low iron petalite from Arcadia, the lithium mine that Prospect is developing near Goromonzi. The MoU allowed an exclusive period of time for the two companies to work out a binding offtake agreement. That exclusivity period expires on July 1.

“Whilst we are happy with the progress of negotiations, they will not be completed by 1 July 2020. The parties continue to negotiate terms with an expectation that a binding offtake agreement will be executed,” Prospect said in a statement on Tuesday.

“Either party may terminate the MOU if the parties have not executed a binding offtake agreement by 1 September 2020.”

Offtake agreements are usually done even before production at a mining operation starts. In the case of Prospect and Sibelco, if they reach a deal, Sibelco will agree to buy a certain amount of lithium from Arcadia at a specified price. Because they guarantee that a mine will find buyers for its products, offtake agreements make projects such as Arcadia more bankable.

Prospects remain

The ultra-low petalite that Arcadia will produce is used in the glass and ceramics market. The glass and ceramics industry consumes over 130 000 tonnes per annum equivalent of ultra-low iron petalite, and Sibelco is a major player in that market.

Prospect is still hopeful that the agreement will go ahead, saying “at the time of this announcement, we are not aware of any operating lithium mine in the world that can produce ultra-low iron petalite suitable for the Sibelco’s customers in the glass ceramic industry.”

The company added: “Whilst our self-imposed deadline will be missed, shareholders should note that Arcadia is the only JORC compliant deposit in the world that will be able to supply ultra-low iron petalite to these existing customers.”

In December, Prospect signed an MoU with Uranium One, the Canada-based unit of Russia’s Rosatom, that could see the miner take up a stake in Prospect and buy over half of the lithium from Arcadia mine. Uncertainty on the world markets, due to COVID-19, has delayed progress on the Uranium One talks and on a separate funding agreement with Afreximbank.