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Market Analysis Latest ASX News

LKE Shares: Announce Additional Canadian Financial Support (ASX:LKE)

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By Kiryll Prakapenka, Tuesday, 28 September 2021

The LKE share price appears slow to respond today. 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).

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.

ASX LKE - Lake Resources Share Price ChartSource: Tradingview.com

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.

Discover our top three ASX-listed pot stocks in 2021. Click here to learn more.

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.

To get all the details, simply click here and we’ll send you a free download of our research.

You’ll get the names of some of the most promising lithium stocks we’ve found, their back stories, and a free subscription to Money Morning.

This e-letter will give you daily access to the most important research in lithium and other markets.

Regards,

Kiryll Prakapenka,

For Money Morning

PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

Kiryll Prakapenka

Kiryll’s Premium Subscriptions

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All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in our reports are forecasts and may not be a reliable indicator of future results. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.

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