Normally, an offtake contract is signed first and then project funding follows. However, in this case the reverse has occurred. The Export Credit Agency (ECA) of Britain, the UK Export Finance (UKEF) has provided a non-binding Expression of Interest (EOI) to provide or underwrite up to 70% of the finance for developing Lake Resources’ (ASX: LKE) flagship Kachi Project in Argentina. Interestingly, the ECA has also indicated it could provide up to 70% of the cost of expanding Kachi.
This really does support LKE’s earlier claim that the market is pushing for an expansion of Kachi. ECA debt normally comes in the form of guarantees. However, the EOI suggests the ECA may also direct lend; subject to due diligence and standard project finance terms. LKE suggests direct lending could comprise ~30% of Treasury linked debt with interest rates of around 3%. ECA guarantees should facilitate the completion of syndicated senior debt, at an estimated 5-6% in the current market. The effective “credit wrap” provided by ECA support, puts LKE in an attractive position to secure a Tier-1 offtake partner.
Di Brookman, analyst at ShareCafe’s sister platform Corporate Connect, has written a report updating her previous work on Lake Resources. It can be downloaded via the Corporate Connect website by clicking on the button below.