Offtake agreement

An offtake agreement is a long-term contract in which a buyer agrees in advance to purchase a fixed share of a mine's or plant's future output.

New mines and processing plants often cost more to build than their owners can finance alone, and lenders want assurance that the output will actually sell once construction finishes. An offtake agreement addresses this by committing a buyer, in advance, to purchase a set share of the project’s future production, sometimes for many years, at a price formula agreed before a single unit has been produced.

Because it de-risks the revenue side of a project, an offtake agreement can be the difference between a mine securing financing and a promising deposit staying undeveloped. Buyers who sign offtake agreements are often manufacturers who need a secure, long-term supply of a specific input, such as battery makers seeking critical minerals, rather than trading firms looking to resell the material.