Wide Interest In Supporting Argentinian Lithium Development
Clean lithium developer Lake Resources NL (ASX: LKE; OTC:LLKKF)has advanced debt funding options for its flagship Kachi Lithium Project in Argentina, with preliminary interest from over half a dozen major international banks to participate in ECA-led project debt finance, subject to Export Credit Agency (ECA) support.
The positive funding environment follows an increased focus by EV makers on supply chain sustainability, mandated by European Union regulations, and a requirement for high quality, battery-grade product.
In March 2021, Lake appointed SD Capital Advisory Limited and GKB Ventures Limited to arrange project finance, with a focus on ECAs. These financial advisers have actively engaged with Lake and the technical advisers at Hatch. They have conducted an in-depth analysis of Kachi’s Pre- Feasibility Study (PFS) and sourcing funding opportunities. Environmental study consultant, Knight Piesold, is undertaking the environmental and social impact study (EISA), to prepare the project for permitting under global standards.
Initial outcomes are the potential for a significantly lower cost of capital to be applied to the Kachi project principally as a result of longer dated, lower cost ECA-led debt. The targeted level of financing support would be approximately 70% of the total funding required. The ‘sweet spot’ for ECA debt repayments is between 5 to 8 years post construction and build-out, implying total debt finance duration of up to 10 years. A number of sourcing opportunities have been identified where minimum export content thresholds can be met, making this project eligible for ECA support.
The financial advisers have highlighted the technical and commercial attractiveness of the Kachi project and its contribution to the UN Sustainable Development Goals, as well as the potential for a production expansion pending a planned resource upgrade and completion of further studies.
The potential size and duration of the debt funding will be provided in the coming months, after expressions of interest are received from potential Export Credit Agencies. Importantly, Lake is well funded through to the final investment decision (FID) on construction finance for Kachi, anticipated in mid-2022, with A$24 million in the bank at the end of the March quarter 2021.
Lake’s Managing Director, Steve Promnitz, said feedback from the recent Benchmark Mineral Intelligence “EV Fest” has further highlighted the lack of supply of battery-quality lithium and also the need for a sustainably produced product, given the potential financial penalties facing EV makers in Europe concerning the minimisation of their carbon footprint and satisfying EU import regulations.
“Export credit agencies and the project finance banks are committed to the new energy transition and to projects with an ESG benefit that include Sustainable Development Goals. As a company focused on the sustainable, direct extraction of lithium to produce a high- quality, battery-grade product, Lake is ideally positioned to contribute to the achievement of these goals,” Mr Promnitz said.
“We look forward to advancing these talks further, together with potential international off-takers, as we progress the Kachi definitive feasibility study towards a successful outcome.”
Meanwhile, Lake has welcomed further support from Acuity Capital, which has agreed to increase the size of its Controlled Placement Agreement (CPA). The facility has been increased to $30 million to better reflect Lake’s higher market capitalisation since the CPA was first established in July 2018.
