Lake Resources secures Japanese offtake and battery supply chain partner for Kachi lithium brine project

Lake Resources (ASX: LKE) has signed a non-binding agreement with major Japanese partner Hanwa Co for an offtake of up to 25,000 tonnes per annum lithium carbonate equivalent over the next decade from its Kachi project in Argentina.

The agreement will establish a strategic collaboration for the development of a clean lithium supply chain to meet environmental demands of the electric vehicle, stationary battery and cathode/precursor manufacturing sectors and their end customers.

Under the terms, Hanwa will co-operate with Lake on the marketing and distribution of its products in the Asian market and co-ordinate a strategic supply chain with potential customers in the battery industry.

Hanwa may also consider providing financial support mechanisms such as equity investments, potential pre-payments on offtake, and trade finance facilities in order to secure a long-term agreement and build a sustainable partnership with Lake.

The agreement will have a minimum offtake of 15,000tpa priced at average quarterly benchmark market prices and may be extended for an additional 10 years.

Mutual benefits

Lake managing director Steve Promnitz said the joint development of a “unique and effective” supply chain would have mutual growth and sustainability benefits.

“This agreement with Hanwa will allow us to stay an independent supplier into global lithium supply chains and ensure security of supply to the market and potential customers,” he said.

“Hanwa will also potentially participate in our other projects to ensure high-quality lithium products with leading ESG (environmental, social and governance) benefits are available to electric vehicle and battery customers.”

A binding long-term agreement with Hanwa will give Lake access to project-scale batteries to compliment a solar farm energy source at Kachi with trade finance at favourable rates for installation.

ESG standards

Project financing is becoming increasingly tied to ESG credentials as investors, debt providers, offtake partners and their customers are demanding new lithium projects adhere to strict standards.

British and Canadian export credit agencies have already indicated a willingness to offer debt financing for around 70% of Kachi’s capital requirements, supporting Lake’s “Target 100” program which aims to supply 100,000tpa of high purity lithium chemical to market by 2030.

“Increasing customer and consumer scrutiny around the environmental credentials of lithium production and concerns about security of supply have given us the confidence to enter into this partnership with Hanwa,” Mr Promnitz said.

He said a successful outcome to negotiations would secure an “A-” credit-rated offtake partner to further de-risk Kachi for financiers and investors.