Masthead header

Marketing Offtake Agreement

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. “The offtake agreement allows Offtaker to block a long-term supply;” In addition to the guarantee of supply, the buyer benefits from a guaranteed price. The contract provides cover for future price increases;¬†Protected from market bottlenecks because delivery is assured. Still puzzled? Here`s a simple breakdown of how offtake agreements work: says that operational mining companies and commodity buyers often sign taketake agreements. In addition, an acquisition agreement facilitates the financing of producers to pass a project through the construction of mines. A lender or investor is more willing to finance a project if it is certain that companies are already lining up to buy the tons of metal it will produce. Offtake agreements are usually a win-win document in which both the project company and the Offtaker enter into a fair agreement. While an offtake agreement is beneficial to both parties, it offers its greatest benefit even before the project is built, because it is a key document – if not the key project – that gives the project lender enough insurance to obtain credit authorization for the project. Depending on the type of project the manufacturer, the agreement may take the form of a service contract or a sales contract.

The offtake agreements should contain three important statements. The first is whether the contract is a firm buy/sale contract or an option contract. The purchase/sale clause is important because it guarantees the guarantee of a future economic playing time, unless a party violates the contract. An option contract gives the buyer the opportunity to exercise the contract if the market provides the buyer with a favourable environment for the execution of the purchase. With Contract for Differences, the project company sells its product on the market and not to the buyer or its hedging counterpart. However, if market prices are below the agreed level, the buyer pays the difference to the project company and vice versa if the prices are above the agreed level.