Australian battery materials firm Liontown Resources has signed an agreement with American electric vehicle company Tesla for the supply of lithium spodumene concentrate.

The five-year deal will see Liontown supply dry metric tonnes (DMT) of spodumene concentrate produced from its new $337m (A$473m) Kathleen Valley project in Western Australia.

Under the deal, the firm will supply up to 100,000DMT in the first year to Tesla. The supply will be increased to 150,000DMT per annum in the subsequent years.

The initial term of the deal is scheduled to start in 2024.

Liontown managing director and CEO Tony Ottaviano said: “Tesla is a global leader and innovator in electric vehicles and having it sign up to become a significant customer is a tremendous achievement and another huge vote of confidence in the quality of the Kathleen Valley project.

“This means that we now have two of the premier companies in the global lithium-ion battery and EV space signed up as foundational customers, marking a significant step towards realising our ambition to become a globally significant provider of battery materials for the clean energy market.”

The agreement with Tesla is subject to Liontown starting commercial production at the lithium project by 2025.

It is also subject to Tesla and Liontown signing detailed definitive agreements by 30 May 2022.

Situated 680km north-east of Perth in Western Australia’s premier mining district, the project has a mineral resource estimate of 156Mt at 1.4% Li₂O and 130ppm Ta₂O₅. It is expected to initially produce around 500ktpa of SC6.0 spodumene concentrate, which will later be expanded to around 700ktpa.

The latest agreement marks the second offtake arrangement secured for the project following the offtake arrangement with LG Energy Solutions.

These two agreements cover more than half of Liontown’s planned production in the project.

Liontown is looking to sign offtake arrangements for the remaining production from the Kathleen Valley project.