Barroso Lithium Project Hinges on a Second Offtake Deal

Savannah Resources has a completed feasibility study, an approved environmental assessment and a state grant. What it does not yet have is enough contracted customers. Lenders want roughly 70-75% of output sold forward under long-term contracts, and today only about 25% sits under a single non-binding heads of terms.

That gap, more than any engineering detail, decides when the Barroso Lithium Project in northern Portugal can secure financing and begin construction.

On 7 October 2026, Chief Executive Officer Emanuel Proenca told analysts that a second long-term offtake agreement is expected this quarter. The market is weighing that promise against a schedule that has already slipped once this year. For UK investors holding AIM-listed Savannah Resources (SAV), the question is how much of the de-risking is real and how much is still pending.

Here is the order in which the remaining milestones are likely to fall, and which of them deserve the most weight in your thinking.

Why does a second offtake matter more than the mine plan?

Start with the arithmetic. AMG Critical Materials signed a non-binding heads of terms in June 2024 covering 45,000 tpa of 5.5% Li₂O spodumene concentrate for five years. That equals roughly a quarter of planned output.

An offtake is a contract in which a buyer agrees in advance to purchase a set volume of a mine’s production. Lenders care because mining project finance is usually limited-recourse debt, meaning it is repaid only from the project’s own cash flows. Banks test their repayment ratios against contracted volumes and floor prices, not hopeful spot sales, which is why covenants across the sector commonly require 60-80% of output to be contracted.

Lithium supply agreements typically specify volume, grade, pricing mechanism and tenor, and lenders read each of those terms as a proxy for how durable the project’s revenue will be under stress.

AMG is also Savannah’s largest shareholder, holding about 15.56% after taking up its entitlement in the September raise (previously about 16%). Savannah has kept at least half of expected concentrate free for other partners.

The counterparties are not named. The company’s 20 July 2026 RNS referred only to a shortlist of “high quality potential partners”, so you are judging a process, not a buyer.

CEO outlook Proenca told analysts Savannah expects to finalise a second long-term offtake agreement within the current quarter, describing negotiations as well advanced with credible global lithium participants.

For you as an investor, a binding second offtake is the clearest evidence that the lender threshold is reachable. Its terms will matter as much as its headline.

What to look for in the contract terms

No terms have been disclosed, so treat these as the questions to ask when the deal lands:

• Is pricing index-linked to a recognised lithium or spodumene benchmark?
• Are there price floors, and caps, that create a protected band?
• Does the buyer carry take-or-pay obligations?
• Is there a prepayment, which could act like quasi-equity and shrink the funding gap?

How does the roughly $420 million funding stack fit together?

Once the offtake question is settled, the money has to follow. Phase 1 capital expenditure (capex, the upfront cost to build the mine) is estimated at about US$417.5m including contingency.

The plan relies on four layers. Each carries a different level of certainty.

The grant is the firmest layer. The cash came largely from the September fundraise, which raised US$40.2m gross at 5.5p per share through a placing, subscription and retail offer; media reports at the time varied, but the company’s own figure is the one to rely on.

Debt is the largest and least settled layer. Savannah has received initial non-binding proposals and is reviewing a shortlist of European and international lenders, with conditional offers possibly supported by a German government-backed guarantee linked to AMG. Lender names and amounts remain undisclosed.

Government support for lithium supply chains, from grants to state-backed guarantees, increasingly shapes which projects reach financing, as the German guarantee linked to AMG illustrates.

The economics give lenders something to work with. The Phase 1 Definitive Feasibility Study (DFS) shows a post-tax net present value at an 8% discount rate (NPV8) of about US$913m and an internal rate of return of 43%, at an assumed US$1,788/t for 5.5% concentrate.

• 183 ktpa of concentrate over a 14-year life
• C1 cash costs of US$473/t
• All-in sustaining costs (AISC) of US$646/t

Because debt capacity depends on how lenders stress-test those numbers, the gap left for equity is the variable that determines how much dilution you may face.

Financial projections are subject to market conditions and various risk factors. Past performance does not guarantee future results.

What is the Barroso Lithium Project, and what does Europe’s largest spodumene deposit actually offer?

Behind the funding debate sits a simple product. Barroso will mine spodumene, a lithium-bearing mineral, and upgrade it into concentrate. That concentrate is not battery-ready; it must be converted into lithium chemicals first.

The basics

The European Commission named Barroso one of the first Strategic Projects under the Critical Raw Materials Act in March 2025, part of an effort to reduce reliance on China-centric supply chains. Annual output is reported to be enough for about 500,000 electric vehicle battery packs.

A JORC Mineral Resource is an estimate of mineralised material with reasonable prospects of economic extraction, graded by confidence. The April 2026 update put Barroso at 39.2 Mt at 1.05% Li₂O:

• Measured: 8.7 Mt
• Indicated: 18.1 Mt
• Inferred: 12.3 Mt

The figure that matters for Phase 1 is narrower: a Probable Ore Reserve of 20.0 Mt at 0.99% Li₂O, the portion planned for mining in the 14-year schedule.

Expansion upside versus Phase 1 reality

Savannah has an Exploration Target of 35-62 Mt at 0.9-1.2% Li₂O, and the company suggests resources could exceed 100 Mt with mine life beyond 50 years. An exploration target is conceptual, not a resource, and none of that upside sits in the DFS numbers.

Europe’s conversion capacity is also limited, which adds counterparty and logistics risk and may push buyers outside the region. Scale and policy support improve the odds of financing, but they do not replace signed contracts.

Exploration targets are speculative and subject to change based on further drilling and company performance.

Can permitting, FID and 2028 production hold to schedule?

Every milestone above feeds a timeline that runs in sequence. The Environmental Impact Assessment was approved in May 2023; what remains is RECAPE, the compliance filing showing the detailed design meets the approved conditions.

1. RECAPE submission: Q4 2026
2. Conditional debt offers: by end-2026
3. Regulator decision from APA, Portugal’s environmental agency, after a standard review of about 50 working days: Q1 2027
4. Final investment decision (FID): early 2027
5. Construction: 2027
6. First production: 2028

This schedule has already moved. The 25 March 2026 update pointed to a final licence in Q3 2026 and FID before end-2026, before RECAPE shifted to Q4 when Savannah brought water-infrastructure engineering forward.

There is real progress to set against that. Savannah holds ISO 14001 environmental certification, appointed Sedgman as front-end engineering contractor this month and bought its first major equipment. Canaccord Genuity wrote on 23 June 2026 that the permitting path is clear and regulatory uncertainty is materially reduced.

Current lithium benchmark prices were not available for this analysis, so the price assumption is a gap you should check independently. Treat 2028 as conditional on a chain of gates, with offtake and financing the most likely to move the date.

Offtake-led project development has become a common route for lithium juniors, where binding buyer commitments unlock debt and shorten the path from feasibility study to construction.

Weighing the Barroso milestones before the next financing signal

The second offtake is the hinge. The funding stack looks credible but leans on conditional debt, and the timetable has already shifted once.

Your watchlist, in order:

1. Binding second offtake, with its pricing and take-or-pay terms
2. Conditional debt offers by end-2026
3. APA’s RECAPE decision in Q1 2027
4. FID in early 2027

Each gate passed removes a layer of risk; each one missed pushes pressure back toward equity holders. How much risk remains is your call to make as each signal arrives.

This article is for informational purposes only and should not be considered financial advice. Investors should conduct their own research and consult with financial professionals before making investment decisions.