* Project must secure financing by the end of the year
* First production slated for end-2020
* Deal for 12,000 tpy cobalt sulphate; 60,000 tpy nickel sulphate
* Offtake for 7 years with extension option for a further 6 years (Adds context, detail on tonnage, competitors)
By Melanie Burton
MELBOURNE Feb 20 (Reuters) - Shares of battery and technology metals developer Australian Mines Ltd AUZ.AX surged on Tuesday after the company signed an off-take agreement with South Korean battery maker SK Innovation for nickel and cobalt from its flagship Sconi project.
The commodity off-take agreement, which is for an initial period of seven years, will be for SK Innovation's newly developed battery manufacturing plants in Hungary and Korea, Australian Mines said on Monday in a statement announcing the deal.
The agreement is contingent on Australian Mines obtaining financing for the project in Australia's far north east by the end of 2018 and for mining to start before the end of 2020.
"The signing of the agreement with SK Innovation is a landmark occasion for Australian Mines and its shareholders," Managing Director Benjamin Bell said in the statement.
"As the only Australian cobalt-nickel-scandium company to have secured an off-take for 100 percent of its expected cobalt and nickel output, the company has (shown that)...Australian Mines is unequivocally a leader in Australia's cobalt sector."
Shares in the miner jumped over 60 percent at the start of trading on Tuesday but ended the day up 26 percent at A$0.115 a share, valuing the company at about A$308 million ($243 million).
Australia, home to the world's second-biggest cobalt reserves, is seeing a rush of interest in projects still years from production as the makers of batteries used in electric vehicles (EVs) seek supplies of the metal from a more costly but less risky source than top producer, the Democratic Republic of Congo. any pure cobalt plays already in production, Australia's miners are racing to be first to break ground.
Clean TeQ CLQ.AX , a close competitor of Australian Mines, owns one of Australia's largest cobalt deposits, with commercial production slated for 2021.
Clean TeQ signed an off-take agreement with Chinese battery materials maker Beijing Easpring last August for 20 percent of its cobalt and nickel sulphate production. company's shares trebled by December but have dropped since then. The story is similar for other cobalt developers Cobalt Blue COB.AX , Artemis Resources ARV.AX and Aeon Metals AML.AX .
Under the deal with SK Innovation, the South Korean company will take all of the nickel and cobalt from the Sconi mine, estimated at 12,000 tonnes per year (tpy) of cobalt sulphate and 60,000 tpy of nickel sulphate. The deal also gives SK a six-year extension option.
"We signed the deal to minimise supply volatility and the long-term supply contract is a way to ensure stable supplies," an SK Innovation spokesman told Reuters.
SK Innovation said in November it will invest 840.2 billion won ($777 million) to build an electric vehicle battery plant in Hungary to meet demand from automakers in Europe. Mines said the agreement also includes an option for SK Innovation to buy up to 19.9 percent of its ordinary shares.
($1 = 1.2642 Australian dollars) ($1 = 1,066.7300 won) ($1 = 1.2653 Australian dollars)