Lake Resources (ASX:LKE) has signed a non-binding agreement with lead Japanese partner Hanwa Co to uptake up to 25,000 tonnes per year of 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 the environmental requirements of the electric vehicle, stationary battery and cathode/precursor manufacturing sectors and their end customers.
Under the terms, Hanwa will cooperate with Lake for the marketing and distribution of its products in the Asian market and coordinate a strategic supply chain with potential customers in the battery industry.
Hanwa may also consider providing financial support mechanisms such as equity investments, potential prepayments on levies and trade finance facilities in order to enter into a long-term agreement and build a lasting partnership with Lake.
The agreement will have a minimum drawdown of 15,000 tpy at the average price of quarterly reference market prices and can be extended for another 10 years.
Lake chief executive Steve Promnitz said co-developing a “single and efficient” supply chain would have mutual benefits for growth and sustainability.
“This agreement with Hanwa will allow us to remain an independent supplier in global lithium supply chains and provide security of supply to the market and potential customers,” he said.
“Hanwa will also potentially participate in our other projects to ensure that high-quality lithium products with leading ESG (environmental, social and governance) benefits are available to [its] electric vehicle and battery customers.
A binding long-term agreement with Hanwa will give Lake access to project-scale batteries to supplement a solar farm power source in Kachi with commercial financing at favorable rates for installation.
Project finance is increasingly tied to ESG credentials as investors, debt providers, offtake partners and their customers demand that new lithium projects meet strict standards.
UK and Canadian export credit agencies have already indicated their willingness to offer debt financing for around 70% of Kachi’s capital requirements, supporting Lake’s ‘Target 100’ program which aims to provide 100,000 tpa of high-purity lithium chemicals on the market by 2030.
“Increasing customer and consumer attention to the environmental credentials of lithium production and concerns about security of supply have given us the confidence to enter into this partnership with Hanwa,” Promnitz said.
He said a successful negotiation would secure an “A-” rated removal partner to further reduce Kachi’s risks to financiers and investors.