Supply And Offtake Agreements
An acquisition agreement is an agreement between a manufacturer and a buyer to buy or sell parts of the manufacturer`s future products. A taketake contract is normally negotiated before the construction of a production site, such as. B a mine or a factory, to ensure a market for its future production. Over-the-counter agreements are legally binding contracts related to transactions between buyers and sellers. Their provisions generally indicate the purchase price of the goods and their delivery date, even if the agreements are concluded before the goods are manufactured and all the land in a facility is broken. However, companies can generally opt out of an acquisition agreement through negotiations with the other party and payment of a royalty. Where OTC agreements have been concluded, financiers may require that each client have a minimum rating or, in other ways, comply with minimal financial audits. In the case of take-and-pay contracts, the buyer only pays for the product taken on an agreed price basis. Cobalt Blockchain Inc. (“COBC” or “company”) (TSXV:COBC) and Traxys Europe S.A. (“Traxys”) are selected as project funding for the Lubumbashi hydroxide facility in DRC. [Read the source] Sometimes the type of supplier is such that the minimum amounts are not feasible and any delivery obligation may be limited to available inputs. For example, in the event of a waste of electricity, regional or local authorities are often unwilling to take risks (and potential commitments) regarding the amount of waste produced, so they can only commit to providing what is produced.
Under these conditions, financiers may have to rely on market offer forecasts to assess supply risk. Over-the-counter agreements are legal contracts between two companies for certain quantities of goods to be delivered from one company to another. These contracts are very common and are mainly used by energy producers such as coal mines or power plants. Often, these agreements contain several safeguard clauses and can take months or years. Finally, if companies want to be integrated into the supply chain and wish to have exclusive production over a longer or shorter period, the acquisition agreement remains the strategic financing of projects that corresponds to their priorities. As with a supply contract, taketake contracts generally apply for an agreed period at an agreed price. However, project products may be high or somewhat convenient or marketable (or both), so that sales over a shorter period or on a spot basis at prevailing market prices may be more appropriate or achievable for the relevant product market. This is particularly the case when the proceeds of the project are heavily traded or where there are a large number of potential buyers, unlike products for which a limited market and a pool of potential buyers are available.
Project participants can reduce both the risk of supply and acquisition by contractually assigning these risks to counterparties through long-term agreements. Price fixing under acquisition agreements may be essential and, depending on the product of the project and the market, project proponents may require price security or take some or all of the market price risks, but they seek to ensure the volume of the acquisition in order to gain security in terms of sales flow.