Lake Resources (ASX: LKE) is a step closer to developing its flagship Kachi lithium brine project and clean processing technology after revealing it had received strong interest to finance about 70% of its development requirements from the UK’s official export credit agency.
UK Export Finance has provided Lake with a formal expression of interest (EoI) for the Kachi funding, which Lake managing director Steve Promnitz says is a “watershed moment” for the company.
“To have a leading ECA willing to indicate financial support for Kachi provides an enormous vote of confidence in our clean energy project,” Mr Promnitz said.
“The support reflects not only Kachi’s robust financials but also its considerable ESG benefits such as a small environmental footprint, satisfying a number of sustainable development goals.”
Mr Promnitz noted the company had more work to do to convert the EoI into an official funding arrangement.
However, he said the company had also been approached by a number of international banks interested in being part of Kachi’s development.
Advancing Kachi clean lithium project
The proposed Kachi operation is based on a 4.4 million tonne lithium carbonate equivalent resource, with brine to be processed using Lilac Solutions’ direct extraction technology, which is scalable, low cost and has a much smaller environmental footprint than conventional methods.
This funding interest from UK Export Finance is expected to deliver a “significantly” lower cost of capital than traditional financing structures.
ECA financing comes with a lower interest rate and longer repayment terms to minimise financial risks.
Under the EoI, the principal would be repaid over 8.5-years once construction has been completed.
The EoI also indicates the total funding offered could be upped to include 70% of the expanded production plant to generate 50,000 tonnes per annum of high purity lithium carbonate equivalent – up from the 25,000tpa outlined in the pre-feasibility study.
“Essentially, this EoI is stating that if Lake does what it says its going to do in the definitive feasibility study and ESIA, the project will be funded,” Mr Promnitz said.
The definitive feasibility study for Kachi and ESIA are “well advanced” and are due to be completed by the end of the March quarter next year.
With $26 million in cash, Lake is funded through to a final investment decision, which is anticipated in mid-2022.
The pre-feasibility study gave the proposed Kachi operation a pre-tax NPV of US$1.6 billion, with annual earnings before interest tax depreciation and amortisation of US$260 million forecast from 2024.
“Combined with backing from potential international off-takers, investors will increasingly see progress towards successful production and expansion of Kachi, perfectly timed to meet the needs of a decarbonising world,” Mr Promnitz said.