Lake Resources has secured additional support from an export credit agency for its Kachi lithium project in Argentina through Export Development Canada.
The company has received an official letter from Export Development Canada (EDC) to potentially work with UK Export Finance (UKEF) – which has also expressed interest – to support around 70% of the total funding required for the project.
EDC would potentially offer direct loans at the OECD fixed rate of 1.77% on the date of signing up to a maximum of US $ 100 million.
This financing method would offer a significantly lower cost of capital than traditional financing structures, with the principal being repaid over a period of 8.5 years after construction.
It also provides flexibility in negotiations for sales agreements and maintains shareholder value.
This means that Lake Resources (ASX: LKE) can remain independent and manage supply chain risk, as Chinese involvement in lithium assets increases the need for a large independent supplier of high purity products for them. European and North American markets.
Significantly reduces project risks
The company claims that this type of financing is unprecedented in the lithium sector and allows it to access rates significantly lower than those of previously developed projects, increases supply flexibility and allows better access to direct loans to low cost.
This all adds up to an increased likelihood of successful development.
“Having the direct sovereign loans from Canada alongside the sovereign backing of the United Kingdom significantly lowers the risks of the project for investors and international banks who continue to express a strong interest in participating in the development of Kachi,” said the director. General of Lake, Steve Promnitz.
“Certainly, Lake has an important job to convert these EOIs into committed funding agreements.
“However, these EOIs are a road map and if Lake does what he says he’s going to do in DFS and ESIA, the project will be funded.”
Demonstrates confidence in clean technology
The company says the letter of intent reflects confidence in its clean lithium mining technology and ensures that the project will be developed to the highest environmental and social standards.
Lake recently announced that Lilac Solutions – whose direct mining technique produces inexpensive, high-quality, and environmentally friendly lithium – is poised to contribute technology, engineering teams and a factory demonstration site, gaining up to 25% stake in Kachi based on performance-based milestones.
After acquiring its stake in Kachi, Lilac is expected to fund approximately US $ 50 million, equivalent to its proportional share of future development costs, by aligning innovation, financing, development and production.
The company believes that Kachi’s ESG benefits make it attractive to international banks keen to get involved in the project.
DFS targeted for Q2 2022
The EDC and UKEF agreements are not binding commitments and are subject to a series of standard project finance conditions and due diligence.
This includes appropriate structured harvest contracts, the successful completion of the final Kachi feasibility study, an environmental and social impact assessment and the Equator Principles.
The company says these are well advanced, with completion expected in the second quarter of 2022.
Lake is also well funded for the final investment decision on financing the construction of Kachi, which is slated for mid-2022.
This will be followed by construction targeting 25,500 tpa lithium carbonate production, with commissioning and production in 2024.
In addition, a 51,000 tpa extension study is also planned at the same time as the DFS.
This article was developed in conjunction with Lake Resources, a Stockhead advertiser at the time of publication.
This article is not advice on financial products. You should consider getting independent advice before making any financial decisions.