The UKEF and EDC collaboration is welcomed by the company and demonstrates potential for further official support for the Lake clean lithium project.
Lake Resources NL (ASX: LKE, OTCQB: LLKKF) has demonstrated additional financial support for its flagship “own” Kachi Lithium project in Argentina by receiving an official Letter of Interest (LOI) from the Credit Agency Canada’s official export (ECA) and Export Development Canada (EDC).
EDC has provided the Letter of Intent to potentially work with UK Export Finance (UKEF) to support approximately 70% of the total funding required for the project, subject to standard project funding terms.
Promisingly, the ESG benefits at Kachi remain significant, which, together with the potential support from ECA, makes international banks eager to get involved in this project.
“Project considerably de-risked”
Lake Managing Director Steve Promnitz said: “Having direct sovereign loans from Canada alongside sovereign backing from the UK dramatically lowers the risks of the project for investors and international banks who continue to express keen interest. to be part of the development of Kachi.
“Certainly Lake has an important job to convert these EOIs into committed funding agreements, however, EOIs are a road map and if Lake does what he says he is going to do in DFS and ESIA, the project will be funded. “
Access to low-cost direct loans
EDC’s letter of intent does not increase the level of potential project financing available from export credit agencies for the project, but increases flexibility of supply with better access to direct loans to low cost and reflects additional confidence around shared funding for a robust project.
He said he was able to provide direct loans to the project up to US $ 100 million, subject to procurement requirements.
These direct loans would be at the attractive OECD fixed commercial benchmark interest rate (CIRR) applicable on the signing date.
EDC is a financial crown corporation dedicated to helping Canadian businesses of all sizes succeed on the world stage.
As an international risk expert, EDC provides Canadian businesses with the tools they need – the business knowledge, financing solutions, equity, insurance and relationships – to grow their businesses with confidence. Its support is based on a commitment to a sustainable and responsible business.
The fact that UKEF and EDC are working together is welcomed by LKE and demonstrates further potential official support for Lake’s clean lithium project.
Financing the project would offer a significantly lower cost of capital than traditional financing structures, with the principal being repaid over 8.5 years after construction.
Promisingly, the Kachi project delivers significant ESG benefits to key stakeholders, including the local community and the global clean energy campaign towards net zero emissions.
The lower interest rate and longer repayment terms associated with ECA financing minimize the financial risks with this level of financing.
SFN in progress
EDC’s Letter of Intent and UKEF’s Expression of Interest are not binding commitments and are subject to a series of standard project funding terms and due diligence, including, but not limited to, contracts properly structured sampling, successful completion of the Final Feasibility Study (DFS) of Kachi, an Environmental Assessment and Social Impact Assessment (ESIA) and Equator Principles.
DFS and ESIA are well underway and the company is targeting completion in Q2 2022.
Lake is well funded until a Final Investment Decision (FID) on financing the construction of Kachi, slated for mid-2022, with A $ 26 million in cash and cash equivalents at the end of the quarter. June 2021, followed by construction, targeting 25,500 tonnes per year of lithium carbonate (LCE) production (tpa), with commissioning and production in 2024.
In addition, an extension study to 51,000 tpa of LCE is planned at the same time as the DFS.
Recently, Lake announced that Lilac Solutions will bring the technology, engineering teams and an on-site demonstration plant, earning a maximum 25% stake in Lake’s Kachi project based on performance-based milestones.
Lilac, after acquiring its stake in Kachi, is expected to fund approximately US $ 50 million, the equivalent of its pro-rated share of future development costs – aligning innovation, finance, development and production.
About the lake
Lake Resources is a clean lithium developer using Lilac’s ‘clean’ direct mining technology for the production of sustainable, high purity lithium from its flagship Kachi project in Argentina’s lithium triangle, among other projects spanning 200 000 hectares.
The Kachi project is a large 70,000 hectare lease with an expandable resource of 4.4 million tonnes of lithium carbonate equivalent of which only 20% is used for 25 years of production at 25,500 tonnes per year.
It is important to note that the direct extraction method used by the company provides a solution to two growing demands for electric vehicle batteries: high purity battery materials to avoid performance issues, and more durable and derived materials. from responsible sources.