I think you on to something.As has been previously stated, for...

I think you on to something.

As has been previously stated, for big auto supply of (suitable grade and spec) Lithium is a major strategic issue underpinning their EV program.

Having located a supplier with proven capability to supply and with potential to scale-up rapidly, rather than signing-up for 500 tonnes per annum (stage 1) it makes sense they would want to partner with AGY and assist financially to enable increasing output. Talk of stages 1, 2, ...N as has been proposed by AGY isn't locked in stone - it can be whatever makes sense for both parties. 

Big Auto's requirements (either directly or indirectly via a battery manufacturer) are...

• We are going to need a lot of Lithium (at specific grade and chemical composition)
• We will need more than one supplier (can't have all eggs in one basket + AGY won't have enough capacity to meet projected demand).
• We need this supply to start coming on line in 18 months to 2 years, and to be scaled-up as vehicle numbers ramp-up
• We'd like to make the deal as financially attractive as possible.
• We need the deal to be risk managed, which means funding will be supplied in stages and the scale-up will be managed to milestones.

It therefore makes perfect sense for the potential OT partner to be working with AGY on a development plan that scales-up in stages without defining an upper limit (the limit is really only defined by how much land AGY can buy).

The likely OT deal with therefore (IMO) be a staged development plan agreed by both parties; a modular plant facilitates a low risk project development, allowing capacity milestones to be achieved while dropping in funding in stages. This assists minimising dilution.

If the OT partner has an equity stake in AGY, then the actual sale price is less important (within limits) to the automaker as they are also sharing in the profits, and have a vested interest in seeing the share price increase. As has already been speculated, they may have already started acquiring shares in AGY.

If the OT partner plays it right, they may sell a large proportion of their stake at some peak-point in the future (say year 8) and actually make a huge profit while enjoying reliable and exclusive supply in the meantime.

My point is, there is no need to define the scope for an initial OT deal - it can be open ended.

IMO

DYOR