Lake Resources (ASX: LKE) is poised to develop its flagship Kachi lithium brine project and clean processing technology after revealing it has attracted strong interest to fund around 70% of its mine development needs. from the official UK Export Credit Agency.
UK Export Finance has provided Lake with a formal expression of interest in financing Kachi, which Lake managing director Steve Promnitz says is a “watershed moment” for the business.
“Having a leading ECA ready to indicate financial support for Kachi is a huge vote of confidence in our clean energy project,” Mr. Promnitz said.
“The support not only reflects Kachi’s strong financials, but also its considerable ESG benefits, such as a low environmental footprint, meeting a number of sustainable development goals.”
Mr. Promnitz noted that the company still has some work to do to convert the EOI into a formal funding agreement.
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’s Clean Lithium Project
The proposed Kachi operation is based on a lithium carbonate equivalent resource of 4.4 million tonnes, with brine to be processed using Lilac Solutions’ direct mining technology, which is scalable, to low cost and has a much smaller environmental footprint than conventional methods.
This financing interest from UK Export Finance is expected to generate a “significantly” lower cost of capital than traditional financing structures.
ECA financing comes with a lower interest rate and longer repayment terms to minimize financial risk.
Under the EOI, the principal would be repaid over 8.5 years after construction is complete.
The EoI also indicates that the total funding offered could be increased to include 70% of the expanded production plant to generate 50,000 tons per year of high purity lithium carbonate equivalent, up from 25,000 tpa indicated in the pre-feasibility study.
“Essentially, this EoI indicates that if Lake does what it says it will do in the Definitive Feasibility Study and ESIA, the project will be funded,” Promnitz said.
The definitive feasibility study for Kachi and the ESIA are “well advanced” and expected to be completed by the end of the March quarter next year.
With $26 million in cash, Lake is funded until a final investment decision, which is expected 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 amortization and amortization of interest of US$260 million projected from 2024.
“Combined with support from potential international buyers, investors will see growing progress towards successful Kachi production and expansion, perfectly timed to meet the needs of a decarbonizing world,” Promnitz said. .