Lake Resources signs long-term offtake partnership MoU, potential to "de-risk" the Kachi Project

Lake Resources (ASX: LKE) has entered into a non-binding Memorandum of Understanding (MoU) with a Japanese-based commodity trading company, Hanwa Co. The company's stock is up 4.7% in early-trade.

While still subject to negotiations, Hanwa plans to buy up to 25,000 tonnes of lithium carbonate per annum at market prices from the Kachi Project. 

The Kachi Project is targeting a base production case of 50,000 tonnes per annum (tpa) when the project comes online in 2024. Lake hopes to ramp production to an aspirational 100,000 tpa by 2030.

Potential de-risking event for project financing

MoUs can be hit-or-miss in nature. However, Hanwa is showing that it intends to do more than just market and distribute Kachi’s lithium carbonate to the Asian market.

According to the announcement, the MoU also allows for Hanwa to consider areas including:

• Equity investment

• Potential prepayment on offtake

• Trade finance facilities

"The MoU reflects that Hanwa intends to move quickly to progress finalisation of the terms on a strong, long-term, binding final agreement on offtake, as well as allow for financial support for Lake,” said Lake's Managing Director Steve Promnitz.

Lake's Chairman Stu Crow also said that the finalisation of a binding long-term agreement with Hanwa will "bolster Lake's financial position as it moves towards a Final Investment Decision" later this year.

Source: Lake Resources (Sep 2021)

Project financing

Lake reiterated the support the company has received from UK and Canada Export Credit Agencies, which cover around 70% of Kachi's capital requirements.

The Kachi Project has an initial capex cost of around US$544m.

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