An agreement between a producer of a resource and a buyer of a resource to purchase/sell portions of the producer's future production. An offtake agreement is normally negotiated prior to the construction of a facility such as a mine in order to secure a market for the future output of the facility. If lenders can see the company will have a purchaser of its production, it makes it easier to obtain financing to construct a facility .
Investopedia explains 'Offtake Agreement'
Offtake agreements are frequently used in natural resource development, where the capital costs to extract the resource is signficant and the company wants a guarantee that some of its product will be sold. Companies can usually back out of an offtake agreement through negotiations with the other party and with the payment of a fee.
Check Syrah Resources SYR recent Offtake Agreement with Chinalco for Graphite.
TRF Price at posting:
8.0¢ Sentiment: LT Buy Disclosure: Held
