The Lake Resources NL [ASX:LKE] received a formal Letter of Interest (LOI) from Export Development Canada (EDC), Canada’s official Export Credit Agency (ECA).
This is a sign that financial support for Lake’s flagship Kachi Lithium Project in Argentina is showing no signs of waning.
The announcement comes on the tail of a recent update to the ASX revealing that UK Export Finance (UKEF) has also indicated a strong expression of interest (EOI).
With large international credit agencies willing to fund its biggest project, Lake Resources is an example of the rising interest in the EV (electrical vehicle) revolution.
However, the LKE share price appears slow to respond today, barely budging at the time of writing.
But looking at the bigger picture, LKE shares have reached new heights in recent times. Check out the share price’s performance over the last 12 months.
Today, let’s look at this morning’s announcement in more detail…
What’s the significance behind Lake’s announcement?
EDC has proposed it would ultimately work alongside UKEG to support approximately 70% of the total finance required for Lake’s Kachi Lithium Project.
EDC has suggested it is able to provide direct lending to the project up to US$100 million (subject to sourcing requirements.)
Notably, direct lending would be at the appealing OECD Fixed Commercial Interest Reference Rate (CIRR) valid on the day of signing.
All of this bodes well for Lake, for two major reasons in particular:
- ECA backing provides significantly lower cost of capital than traditional debt financing, which makes this a smart financial move for Lake.
- The fact that international agencies are willing to be so upfront and specific in their interest shows ‘demonstrated additional confidence in clean lithium technology,’ according to the company.
It’s important to realise that EDC’s LOI does not increase the level of potential project finance available from Export Credit Agencies for the project.
However, it does increase sourcing flexibility, greater access to low-cost direct lending and a host of other benefits.
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Lake Resources Share Price Outlook
There’s no denying LKE has a robust project in the works and, better yet, support appears strong and widespread.
Lake’s Managing Director, Steve Promnitz, commented:
‘Having Canada’s direct sovereign lending alongside the UK’s sovereign support considerably de-risks the project for the investors and the international banks who continue to express strong interest to be part of Kachi’s development.’
But there’s no signature on the dotted line just yet.
‘Admittedly Lake has significant work to convert these EOIs into committed funding arrangements,’ Promnitz revealed.
‘However, these EOI’s are a road map and if Lake does what it says it’s going to do in the DFS and ESIA, the project will be funded.’
Investors may wish to wait until agreements are more set in stone before putting their money into Lake.
ASX and the lithium boom
Lake Resources is riding plenty of momentum right now, and it’s very possible some excellent gains could lie ahead for investors willing to be patient.
But LKE is just one of many companies enjoying the hot interest in the lithium sector.
The fact is there are countless exciting opportunities in the clean energy space right now…and not all of them are equal.
A few may go down in flames. Some will be more likely to be winners than others.
So how do you know which lithium stocks to buy? Nobody knows for sure, but our research is giving us some very strong hints about a few companies in particular…
There are three compelling lithium stocks on the ASX right now that we believe could be about to go bananas.
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