Lake secures up to US$100m Canada Export Finance for Kachi project
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Lake Resources has secured additional export credit agency support for its Kachi lithium project in Argentina via Export Development Canada.
The company received a formal letter from Export Development Canada (EDC) to potentially work alongside UK Export Finance (UKEF) – who have also expressed interest – to support around 70% of the total finance required for the project.
EDC would potentially provide direct lending at the OECD fixed rate of 1.77% at the date of signing for up to US$100 million.
This funding method would deliver a significantly lower cost of capital than traditional financing structures, with the principal repaid over an 8.5-year period post-construction.
It also provides flexibility in negotiations for off-take agreements and maintains shareholder value.
This means Lake Resources (ASX:LKE) can remain independent and manage supply chain risk as Chinese involvement across lithium assets increases the need for a large independent supplier of high purity product for Europe and North American markets.
The company says this type of funding is unprecedented in the lithium sector and allows it to access significantly lower rates than previously developed projects, increases sourcing flexibility, and allows greater access to low-cost direct lending.
All of this adds up to an increased likelihood of successful development.
“Having Canada’s direct sovereign lending alongside the UK’s sovereign support considerably de-risks the project for the investors and the international banks who continue to express strong interest to be part of Kachi’s development,” Lake managing director Steve Promnitz said.
“Admittedly Lake has significant work to convert these EOIs into committed funding arrangements.
“However, these EOIs are a road map and if Lake does what it says it’s going to do in the DFS and ESIA, the project will be funded.”
The company says the LOI reflects the confidence in its clean lithium extraction technology and ensures the project will be developed to the highest environmental and social standards.
Lake recently announced that Lilac Solutions – whose direct extraction technique produces cheap, high quality, environmentally friendly lithium – is set to contribute technology, engineering teams, and an on-site demonstration plant, earning in to a maximum 25 % stake in Kachi based on performance-based milestones.
After earning its interest in Kachi, Lilac will be expected to fund around US$50 million, equivalent to its pro rata share of future development costs – aligning innovation, funding, development, and production.
The company reckons the ESG benefits at Kachi make it attractive for international banks keen to be involved in the project.
The EDC and UKEF deals are not binding commitments and are subject to a series of standard project finance terms and due diligence.
This includes suitable structured offtake contracts, the successful completion of Kachi’s Definitive Feasibility Study, an Environmental and Social Impact Assessment and Equator Principles.
The company says these are well advanced, with completion targeted in Q2 2022.
Lake is also well funded for the final investment decision on construction finance for Kachi, which is anticipated in mid-2022.
This will be followed by construction targeting 25,500tpa lithium carbonate production, with commissioning and production in 2024.
Plus, an expansion study to 51,000 tpa is also planned at a similar time as the DFS.
This article was developed in collaboration with Lake Resources, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.