Lake appoints Citi and J.P. Morgan as Joint Coordinators for Proposed Debt Finance of the Kachi Lithium Project

LKE has appointed two leading project finance institutions, Citi and J.P. Morgan, as Joint Coordinators (JCs), for the Kachi Lithium Project.  

The appointment was undertaken after a Tender Panel issued by Lake’s advisor, GKB Ventures Ltd, to over 10 international banks and an extensive review and selection process which envisaged export agency guarantees for the proposed debt financing. The results of the Tender Panel implied that indicative bank appetite for the Kachi Lithium Project was in excess of 5 times the required amount, reflecting the strong interest by international banks for this project and the indicative support of the Export Credit Agencies (ECA’s).

Citi and J.P. Morgan were deemed the strongest combination to coordinate the proposed financing package for this particular project. The two investment banks will work together on the debt financing package for Lake’s 50,000 tonnes per annum (tpa) lithium carbonate equivalent (LCE) Kachi Lithium Project, with the ongoing support of GKB Ventures Ltd and SD Capital Advisory Limited.  

The contemplated debt financing will be based on the indicative support by UK Export Finance (UKEF, the Export Credit Agency of the United Kingdom) to cover approximately 70% of the total Kachi Project funding requirement, subject to UKEF approval and to standard project finance conditions(ASX release 11 August 2021). 

It is also planned to have Export Development of Canada, (EDC, Canada’s Export Credit Agency) to participate alongside UKEF as the lead ECA, under a Common Terms Agreement (ASX release 28 September 2021). 

The appointment of the investment banks advances the development of the Kachi Project towards final credit approval and is part of the overall strategy set in place by GKB Ventures Ltd and SD Capital Advisory Limited.

The investment banks will co-ordinate workstreams between lenders and third-party analysis on major project milestones, including, among others, due diligence, the forthcoming JORC compliant definitive feasibility study (DFS) and the Environmental and Social Impact Assessment (ESIA).

The amount of the proposed debt financing will be governed, among other things, by the outcomes of the DFS currently underway and the Export Credit Agencies assessments of all studies that the company on foot.

“We are pleased to partner with Citi and J.P. Morgan, who support Lake’s commitment to sustainable extraction, and minimising our environmental footprint”, Steve Promnitz, Lake’s Managing Director, said.

“Together, we are contributing to a clean energy future that aligns with investors, debt providers, and off-takers requirements that new lithium projects adhere to strict ESG standards,” said Mr Promnitz. 

LKE has advised the market of an offtake of approximately 25,000 tonnes per annum (tpa) of lithium from the Kachi Project has been signed in a non-binding Memorandum of Understanding (MoU) with Ford Motor Company.

“As we’ve shared, Ford is sourcing deeper into the battery supply chain,” said Lisa Drake, Ford’s vice president, EV Industrialization.

“This is one of several agreements we’re exploring to help us secure raw materials to support our aggressive EV acceleration,” she said.

“Both Lake and Ford see this as an opportunity for a potential long-term agreement with the ability to scale up environmentally responsible production and participate in Lake’s other projects to ensure high-quality lithium products are available to Ford,” Steve Promnitz, Lake’s Managing Director, said.

“This MoU with Ford supports Lake’s strategy to be a key independent supplier into global lithium supply chains and ensure the security of supply to customers.” 

Lake’s Chairman Stu Crow said project financing was becoming increasingly tied to ESG credentials and that investors, debt providers, and off-takers and their customers are demanding that new lithium projects adhere to strict ESG standards.

“Increasing customer and consumer scrutiny around lithium production's environmental and ethical credentials drives our focus on sustainable extraction,” Crow said.

“Lake Resources is committed to integrating sustainable development practices throughout our operations, minimising our environmental footprint, and contributing to a clean energy future.

“This MoU with Ford follows the Hanwa MoU. Together with the UK and Canada Export Credit Agencies’ indicative provision of debt finance for around 70 percent of the Kachi project’s capital requirements, this provides a framework of support for Lake’s TARGET 100 Program, which has the goal of producing annually 100,000 tonnes of high purity lithium chemical to market by 2030,” he said.

Lilac Demonstration Plant being delivered to Kachi Lithium Project. 

LKE shares have risen over 7% today to $1.05 on the news that the modular demonstration plant designed and built by the engineering team at Lilac Solutions, has been dispatched from California USA to the Kachi Project in Argentina.

Lilac Solutions, Lake’s technical partner, has assembled the ion exchange modules and supporting equipment for the demonstration plant within five 40 ft (12m) shipping containers.

The modular design allows for a “plug and play” approach, once brine feed, power and reagents are connected. The demonstration plant will operate for around 3 to 4 months to produce lithium chloride (eluate) representing 2.5 tonnes of lithium carbonate.

This will be converted into high purity battery quality lithium carbonate for potential offtakers and battery qualification later in the year. The demonstration plant operations on site will also inform final engineering design prior to construction of the commercial-scale project. 

Meanwhile, test work at Lilac Solutions’ facility in California continues to produce the data required for the Definitive Feasibility Study and lithium carbonation testwork continues at Hazen Research in Colorado.

“Both Lake and Lilac are very confident that the demonstration plant incorporating Lilac’s proprietary ion exchange process will prove to investors and offtakers that it is scalable and functions well on site by successfully producing a high quality lithium product. Lake is well positioned to deliver a major project with consistent high quality product with substantial ESG benefits”, Lake’s Managing Director, Mr Steve Promnitz, said.

Kachi Production increased to 50,000 tonnes/year lithium carbonate as Base Case for DFS 

Lake this morning has confirmed that the production base case for the Kachi Lithium Project will be increased to 50,000 tonnes per annum lithium carbonate equivalent (LCE) in the Definitive Feasibility Study (DFS) and the final investment decision (FID).

The DFS will be expanded from 25,500 tpa LCE to 50,000 tpa LCE, underpinned by an anticipated increased resource estimate from drilling results (ASX announcement 15 Dec 2021, 7 July 2021).

The formal decision has been driven by:

1. the increasing demand by prospective offtake partners for a secure supply chain of environmentally friendly high purity lithium carbonate;

2. the indicative support to fund the project by Export Credit Agencies and the international bank panel. The UK and Canada Export Credit Agencies have already indicated a willingness to project debt finance around 70 percent of the project’s capital requirements (ASX announcement 11 Aug 2021);

3. the supportive investment policies of the Argentine Government who have announced a process to lower export taxes as part of the Strategic Plan for Mining Development;

4. the confidence of technology partner Lilac Solutions that its modular direct lithium extraction technology is scalable and cost effective.

“Given the increasing demand and the significant lithium supply gap, Lake is focused on delivering high purity lithium carbonate at scale with meaningful ESG benefits”, Lake’s Managing Director, Mr. Steve Promnitz, said.

“Lake has received indicative financial support for an increase in the size of the Kachi project from the Export Credit Agencies (ECA’s) of the UK and Canada and the numerous international ECA-supported banks. Also, Lake’s technology partner, Lilac Solutions, is focused on advancing the Kachi Project at this larger scale.”

Lake’s Chairman, Mr. Stu Crow, said the independence of Lake Resources and the Kachi project added to the strategic appeal of the offtake.

“We are well placed given quality resource, leading technology and key finance partnerships to ensure an optimal set of offtake agreements that align with these expansion plans and create maximum value for our key stakeholders,” he said.

LKE is currently up 3.16% to 98 cents.

Lake Accelerates Exploration Across its Broader Projects Portfolio as Lithium Supply-Demand Deficit Grows

• 50,000 litres of brines from Lake’s Cauchari Project to be shipped and tested by groups specialising in direct lithium extraction and conversion to lithium hydroxide.
• Pre-feasibility study planning for Cauchari underway.
• Lake to test additional brines from Olaroz and Paso projects to meet objective of producing high purity, sustainable lithium from a number of its 100% owned projects.
• Exploration to be accelerated as demand continues to outstrip supply, with projections of significant supply deficit emerging from 2024.

Lake Refreshes Kachi PFS; NPV Increases to US$1.6Bn on Updated Pricing Potential Kachi Production Increase Under Review

• Kachi NPV8 increases 110% to US$1.6bn (A$2.1 billion) based on revised lithium price estimates in a refreshed PFS, based on 25,500 tpa lithium carbonate production, which demonstrates a more robust financial outcome than the original conservative PFS price assumptions.
• Kachi project value, as post-tax NPV8, increases 110% to US$1.58 billion (A$2.1 billion) with a 35% IRR and annual EBITDA of US$260 million (A$350m), using updated lithium price forecast of US$15,500/tonne for battery grade lithium carbonate.
• Lake assessing potential increase of lithium carbonate production at the Kachi Lithium Brine Project, as demand continues to rise from battery makers for high purity product.