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BAtteRY MIneRALs FocUs

“We’re quite confident that they can do
All credit goes to Lake it, Lilac is quite confident they can do it,
but the market still has some concerns
around whether those very high purity
ake Resources NL managing director as lithium sector risk, and support a pro- guidelines and measures can actually be
LSteve Promnitz hopes backing from ject which has quite genuine ESG cre- delivered. Offtakers also want to make
two government export credit agencies dentials which are orders of magnitude certain that the product meets all of their
and a strategic investment from its tech- better than others.” specifications, notwithstanding the quali-
nology partner will cast aside any linger- Lilac’s proprietary direct extraction fication process can be quite lengthy –
ing doubt over the company’s ability to technology has long been touted as the up to 12 months in the case of some bat-
land debt financing for its Kachi lithium key to unlocking the processing chal- tery makers – so you want to be doing
brine project in Argentina. lenges at Kachi. More than three years that now, not in your first 12 months of
Canadian export credit agency EDC of test work has indicated the process is production.
recently joined UK Export Finance low cost and capable of achieving higher “By having Lilac working with us, to-
(UKEF) in pledging funding support for lithium recovery rates (80-90%) than oth- gether with the offtakers, we believe we
the development of Kachi, just days after er technologies to produce battery-grade can meet those guidelines that the bat-
Lake confirmed Lilac Solutions Inc could lithium carbonate of 99.97% purity. It has tery makers want, and we can be sell-
earn up to 25% of the project under a also been widely praised for being an ing a high-quality product at an elevated
staged agreement to continue providing environmentally-friendly process. price from day one of production – and
its technology, engineering teams and an Backed by the likes of Bill Gates, Jeff that is of real value to shareholders.”
on-site demonstration plant. Bezos and Jack Ma, Lilac will earn its Lake expects to deliver both the DFS
Lake plans to have both agencies 25% stake in Kachi over three stages. and ESIA in Q2 next year, with a final in-
working together under a common terms The first 10% will be awarded upon com- vestment decision to follow shortly there-
agreement which covers about 70% of mitting to funding the remaining testing after. First production has been slated for
the total project funding requirements of its technology, with the next 10% com- 2024.
for Kachi, with EDC potentially provid- ing after satisfying all agreed criteria us- An updated PFS published earlier
ing direct lending to the project of up to ing the upcoming on-site demonstration this year envisaged 25,500 tpa lithium
$US100 million. OECD fixed commercial plant. The final 5% is achieved when a carbonate equivalent over 25 years at
interest rates for this type of loan are cur- refined lithium product meets the agreed Kachi, with annual EBITDA of $US260
rently priced at 1.77% with a repayment qualification standards with potential million, post-tax NPV of $US1.58 billion,
period of 8.5 years. offtake partners. based on a capex of $US544 million and
The commitments from EDC and After completing its earn-in, Lilac will operating costs of $US4,170/t.
UKEF are currently non-binding and re- then be expected to contribute circa Drilling is currently ongoing at the pro-
main subject to a series of standard pro- $US50 million, equivalent to its pro-rate ject to support an expanded production
ject financing terms and due diligence, share of future development costs. rate of 51,000 tpa.
including completion of a DFS, finalising Promnitz said with his company now “Most of the offtakers we speak to
offtake and preparing the environmental holding advanced talks with a range of want to buy everything we can produce,
and social impact assessment (ESIA). debt providers, Lake’s agreement with but from a risk management perspec-
Promnitz said having sovereign sup- Lilac needed to be more “fulsome” and tive, we think it’s best to have at least two
port at this stage of project development “one that could stand the test of time with offtakers, and that’s what is driving an
was a significant de-risking event for project financing”. expansion case,” Promnitz said.
Kachi. “It’s interesting that the concern in the “We’ve already had indications from
“It’s pretty remarkable for a start-up market, particularly the equities mar- export credit agencies that they would
company that’s moving into first produc- ket, was still around the technology and be keen to fund the expansion. That’s
tion, and it’s pretty remarkable even if would the technology work, would it work why we’ve got the rigs on site now drilling
you were in production,” Promnitz told at scale, if it works at scale can it con- more holes and we’ll release that data
Paydirt. tinue to deliver the quality of product, and in an appropriate time. It doesn’t really
“What I think this demonstrates is the so we decided with Lilac that it might be move the dial from a market perspec-
eagerness of export credit agencies to best if they earn into the project progres- tive, but it’s following a path whereby we
be involved in this space that they’re pre- sively by actually delivering those mile- can create a reserve for the DFS, we can
pared to take on Argentina risk, as well stones,” Promnitz explained. grow the resource for the expansion, and
we can also demonstrate how the pro-
duction wells are going to be operating.
Lake is on track to complete a DFS and eSiA “When we released our first resource
for its Kachi lithium project in Argentina back in late 2018, we also released an
during the first half of 2022 exploration target which showed that this
could easily be 4-7 times larger because
it’s open laterally and it’s open at depth.
So, we’ve got no real concerns about ex-
panding the resource, because only 20%
of it is used in 25 years of production.
What we want to do here is upgrade the
resource and show it can be expanded
as necessary.”
– Michael Washbourne

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