Vulcan, which will extract lithium from geothermal brine via its 1.7 billion euro ($1.4 billion) project, said the five-year deal could be renewed for five more years. The contract is expected to be finalised by the end of November.
Vulcan's process for extracting lithium, a key ingredient for electric vehicle batteries, will produce renewable power and emit no carbon dioxide, unlike Australia's hard rock lithium mining. The water will also be recycled, unlike the evaporation technique used in arid areas of South America.
The company, which plans to operate in Germany's Upper Rhine Rift, said LG Chem's LG Energy Solution (LGES) would buy 5,000 tonnes of battery grade lithium hydroxide in 2024, the first year of production, rising to 10,000 tonnes a year. LGES will use the lithium to make battery cathodes.
Vulcan's German subsidiary was preparing for a potential listing in Frankfurt this year, the unit's head Horst Kreuter said. "We are sensing a lot of interest from investors in Europe," he told Reuters.
The LGES deal is the first for Vulcan's German project, accounting for a quarter of its output from its five planned plants, which are expected to be operating from 2026.
Vulcan previously said it was open to selling 80% of its lithium via long-term deals with the rest sold on the spot market, but Managing Director Francis Wedin said Vulcan's German operations could consider selling more via long-term contracts.
"We could go to 100% potentially of future supply we will just have to take it as it comes," he told Reuters, adding that the firm was "overwhelmed with demand" from equipment makers.
Vulcan said it was in talks with several major customers in the European battery and electric vehicle markets, without offering details.
Vulcan signed a memorandum of understanding this month with French-Italian automaker Stellantis to supply lithium, sources said. Daimler previously said it was in talks about potential purchases from Vulcan.
Vulcan plans to expand in Germany's Rhine Valley, which could include acquisitions, Wedin said.
Kreuter said the price for Vulcan's lithium produced in Germany would be lower than the cost of lithium carbonate from Chile or Argentina.
"This is due to the additional revenue from the sale of renewable energy won from the thermal plants," he said.
($1 = 1.1805 euros)
(Reporting by Melanie Burton in Melbourne and Sameer Manekar in Bengaluru; Editing by Jason Neely and Edmund Blair)
By Melanie Burton and Ilona Wissenbach