Magnis share price rockets 23% on Tesla deal

The three-year offtake agreement is a big deal for this ASX small-cap lithium share.

| More on:
Man pointing at a blue rising share price graph.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Magnis share price is soaring on news it has signed a three-year offtake deal with Tesla 
  • Tesla has committed to purchasing a minimum of 17,500 tonnes per annum (tpa) with the option to buy up to 35,000 tpa 
  • The agreement is a big deal for the ASX small-cap lithium share 

The Magnis Energy Technologies Ltd (ASX: MNS) share price is soaring on news it has signed a three-year offtake deal with Tesla Inc (NASDAQ: TSLA).

The ASX lithium share opened at 49 cents, up 22.5% on Friday's closing price, and is now at 47.5 cents.

The lithium-ion battery technology and materials company requested a trading halt before the market open yesterday pending the announcement.

Small-cap ASX lithium share gets a big customer

Magnis has entered into a binding offtake agreement with Tesla for the supply of anode active materials (AAM) from February 2025.

Tesla has committed to purchasing a minimum 17,500 tonnes per annum (tpa) with the option to buy up to 35,000 tpa for a minimum three-year term at a fixed price.

The deal was signed over the weekend. It is conditional on Magnis securing a location for its commercial AAM facility by 30 June. It also has to start production at a pilot plant by 31 March 2024.

Production at the commercial facility needs to be underway by February 2025. The agreement is also subject to customer qualification.

This is big news for the ASX small-cap, with the company describing it as a "material transaction".

Magnis Chair Frank Poullas commented:

We are really excited to bring our high performing AAM to market that requires no chemical or thermal purification throughout the whole process, which differentiates this sustainable material in the market and provides great value to all parties."

What's next for the Magnis share price?

The Magnis share price has been rising, up 25% in the year to date following today's news. This compares to a 5.5% bump in the S&P/ASX All Ordinaries Index (ASX: XAO).

Magnis has commenced large-scale development of its pilot plants for both AAM and graphite concentrate from its Nachu mine in Tanzania. The company has ordered equipment and hired staff.

Next, it has to choose a location in the United States for the AAM commercial facility.

Meanwhile, the company needs to get its lithium materials certified by the United Nations for transport.

Last Friday, Magnis told investors there would be a delay in the certification due to a bad cell result.

Magnis has a 61% interest in the plant, which commenced commercial lithium cell production in August 2022. It began the process of securing independent certification from the UN late last year.

The independent certification process ensures that the batteries are safe to transport in large quantities by air, sea, rail, or road. The certification is based on international safety standards, including Standard UN38.3.

Certification will allow Magnis to ramp up the size of its sales.

In its statement, Magnis said all 10 cells submitted for UN certification had to pass and one cell failed.

The company said:

In one of the last tests performed, a cell reported an irregular result which has resulted in the process starting again with a new batch of cells.

In order to compress the timeline to achieve certification, additional accredited independent certifiers have been appointed. 

The Magnis share price tumbled by 8% to 40 cents on the news.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

Three miners looking at a tablet.
Materials Shares

Why Bell Potter says this ASX mining stock is a top buy

Let's see which stock the broker is tipping to deliver big returns.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Materials Shares

Down 39% in a year, why IGO shares still look overpriced

A leading expert doesn’t believe IGO shares are out of the woods just yet.

Read more »

Man with rocket wings which have flames coming out of them.
Materials Shares

This ASX 300 stock is surging 25% on US defence deal

The announcement of a 'a pivotal milestone' is getting investors excited today.

Read more »

A happy construction worker or miner holds a fistful of Australian dollar notes.
Materials Shares

$5,000 invested in BHP shares 5 years ago is now worth…

Will its shareholders be happy with their investment? Let's find out.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Materials Shares

Guess which ASX 200 stock is ending the week with a bang thanks to Rio Tinto

This stock has won a major contract from the mining giant.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Materials Shares

Is it time to buy ASX lithium shares?

Lithium prices continue to sink. Has this created a buying opportunity?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Materials Shares

Mineral Resources shares sink on Onslow Iron blow

This miner is having a tough session. Let's find out why.

Read more »

A man sits in a chair hunched over a laptop and covered head to toe in frozen icicles to represent Envirosuite's trading halt
Materials Shares

MAC Copper shares in trading halt as miner flags 'potential control transaction'

MAC Copper shares are frozen while Sandfire Resources shares are the fastest risers of the ASX 200 today.

Read more »