Offtake Agreement

Loading the player...

What is an 'Offtake Agreement'

An offtake agreement is an agreement between a producer of a resource and a buyer of a resource to purchase/sell portions of the producer's future production. An offtake agreement is normally negotiated prior to the construction of a facility such as a mine in order to secure a market for the future output of the facility. If lenders can see the company will have a purchaser of its production, it makes it easier to obtain financing to construct a facility .

BREAKING DOWN 'Offtake Agreement'

Offtake agreements are frequently used in natural resource development, where the capital costs to extract the resource is signficant and the company wants a guarantee that some of its product will be sold. Companies can usually back out of an offtake agreement through negotiations with the other party and with the payment of a fee.

RELATED TERMS
  1. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities. ...
  2. Gentleman's Agreement

    An unwritten agreement or transaction backed only by the integrity ...
  3. Smithsonian Agreement

    An agreement reached by a group of 10 countries (G10) in 1971 ...
  4. Market Standoff Agreement

    An agreement that prevents insiders of a company from selling ...
  5. Term Repurchase Agreement

    Under a term repurchase agreement, a bank will agree to buy securities ...
  6. Reverse Repurchase Agreement

    The purchase of securities with the agreement to sell them at ...
Related Articles
  1. Term

    How Offtake Agreements Work

    An offtake agreement is a legal business agreement between a buyer and a seller.
  2. Stock Analysis

    Denison Alleviates Liquidity Risk

    Dension raises cash from agreement with Kepco, and alleviates pressure on balance sheet.
  3. Economics

    How Does a Credit Facility Work?

    A credit facility is a loan or collection of loans a business or corporation takes to generate capital over an extended period of time.
  4. Investing Basics

    What's a Reverse Repurchase Agreement?

    A reverse repurchase agreement is the buyer side of a repurchase agreement (also called a repo).
  5. Retirement

    Create A Pain-Free Postnuptial Agreement

    This marital contract can underline your love for each other - not undermine it.
  6. Personal Finance

    Master The Art Of Negotiation

    Learn the strategies that will help you to come out on top in any negotiation.
  7. Financial Advisors

    How to Bring Up a Prenup with Clients

    Prenups aren't just for the rich. Here's how to help clients agree to one if you think they'll benefit.
  8. Investing Basics

    ISDA Master Agreement

    The ISDA Master Agreement is a document outlining the terms of an over-the-counter derivatives transaction between two parties. This document serves as a standard agreement in these transactions ...
  9. Mutual Funds & ETFs

    Natural Resources ETF: IGE or GNR?

    Explore a comparison between IGE and GNR, and learn about the differences between the two ETFs, and their top holdings and sector allocations.
  10. Taxes

    Form 9465: Don't Pay Your Back Taxes Without It

    This form can lighten your tax load if you owe Uncle Sam.
RELATED FAQS
  1. What tax implications are there for parties involved with a reverse repurchase agreement?

    Learn about the tax consequences that the buyer can face as a result of a reverse repurchase agreement ("reverse repo") with ... Read Answer >>
  2. Which terms should be included in a partnership agreement?

    Understand what specific terms should be included in a business partnership agreement and how each affects the partners in ... Read Answer >>
  3. What is the primary use of reverse repurchase agreements?

    Discover how the Federal Reserve utilizes reverse purchase agreements for the primary purpose of offsetting temporary shifts ... Read Answer >>
  4. What is the difference between a repurchase agreement and reverse repurchase agreement?

    Learn how a repurchase agreement is a form of collateralized lending and a reverse repurchase agreement is a form of collateralized ... Read Answer >>
  5. What main factors affect share prices in the metals and mining sector?

    Discover the primary factors that influence share prices of companies in the metals and mining sector and how companies can ... Read Answer >>
  6. What inputs are considered to be factors of production?

    Learn what the economic term "factors of production" means, what the four categories of factors of production are and what ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center