Centaurus Metals Ltd (ASX: CTM) recently reported some good news, with global mining giant Glencore agreeing to a supply agreement for nickel concentrate from the company's Jaguar project in Brazil.
The analyst team at Canaccord Genuity subsequently ran the ruler over the company and upgraded their share price for it, which we'll get to shortly.
Firstly let's look in more detail at what the company has reported.
Major milestone achieved
Centaurus said in a statement to the ASX on Monday that it had signed a binding offtake agreement with Glencore, "marking a key step in advancing the project towards development''.
The company added:
The Agreement is for the supply of 20,000 dry metric tonnes per annum of high-grade (32%) nickel concentrate (6,400 tonnes per annum of nickel in concentrate) to Glencore, with the base destination of Canada for treatment at Glencore's Sudbury smelting operations, and commencing from the beginning of 2029 for a period of five years. The Offtake Agreement with Glencore represents approximately 30% of the planned annual production from Jaguar, with Centaurus retaining flexibility over how the balance its production will be used to support the funding of the Jaguar Project in advance of a Final Investment Decision (FID).
Pricing under the offtake agreement would be linked to the price of nickel on the London Metals Exchange, the company said, and there would also be credits paid for any copper and cobalt byproducts in the concentrate.
The agreement is subject to the Centaurus board making an FID by 30 September this year and first concentrate production being achieved by 15 January 2029.
The estimated value of the agreement is more than US$450 million over the initial five year contract term.
Centaurus managing director Darren Gordon said it was a milestone for the company.
The signing of our first binding offtake agreement for nickel concentrate production with Glencore is a significant achievement for Centaurus and the Jaguar Nickel Project. Glencore is one of the biggest names in natural resources globally and one of the longest-standing integrated participants in the nickel sector. Signing them up as a long-term offtake partner is a major coup that validates the quality of the Jaguar Project and supports our commercial development strategy. We look forward to building a sustainable low-cost supply of low carbon nickel in Brazil supported by Glencore's long history in the sector and their deep knowledge of the market. Importantly, the Offtake Agreement will support and help de-risk the ongoing debt and equity funding processes which we currently have underway.
Centaurus shares looking cheap
The team at Canaccord Genuity said they believed the agreement was, "a significant step toward the project's commercial development''.
Canaccord has a price target of 85 cents on Centaurus shares, increased from 80 cents, compared with the current share price of 53 cents.
If achieved, this would constitute a 60.3% increase. Centaurus was valued at $288.2 million at the close of trade on Monday.
The post Which ASX mining project developer is 60% undervalued according to Canaccord Genuity? appeared first on The Motley Fool Australia.
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