Allkem sets up funding for Sal de Vida

7th October 2022 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH (miningweekly.com) – ASX-listed lithium developer Allkem has signed a non-binding term sheet with the International Finance Corporation (IFC) over a potential $200-million project finance facility for the Sal de Vida project, in Argentina.

IFC’s proposed investment comprises a $200-million debt packing, including up to $100-million from IFC for a tenor of up to nine years, and the remainder to be funded by a syndicate of commercial banks.

Allkem on Friday said that the proposed funding structure would provide Sal de Vida with a syndicated loan agreement with the diversified international lender group at the asset level and will help de-risk the capital structure of the project.

“We are already in a strong financial position to self-fund the Sal de Vida project, however, we saw an opportunity to further improve the financing structure for Sal de Vida and partner with IFC - an institution with decades of experience providing finance and sustainable business solutions in the mining space,” said Allkem MD and CEO Martin Perez de Solay.

“Sal de Vida is expected to generate significant economy-wide benefits that will improve the fiscal outlook, economic performance and social outcomes at national, regional and local community levels.”

Subject to finalisation of facility terms, legal due diligence, approval from the Allkem board of directors, approval by IFC management and World Bank Group board of directors the facility is expected to close before the end of 2022.

A 2021 updated feasibility study for the Sal de Vida brine project estimated that the Stage 1 operation would require a capital investment of $153-million to develop a production capacity of 10 700 t/y of lithium carbonate, with 80% of the production at battery grade quality.

The Stage 1 operation is expected to have a pre-tax net present value (NPV) of $809-million, at an 8% discount rate, and a pre-tax internal rate of return (IRR) of 43%, with a pay-back period of under two years from the start of commercial production.

The study also contemplates a two-staged expansion with the design based on a replication of the Stage 1 project, to deliver a targeted production of 32 000 t/y of battery grade lithium carbonate once all three stages are in full production.

The project’s mine life has been estimated at 44 years, based on the current brine reserve estimate of 1.3-million tonnes lithium carbonate equivalent.

The Stage 2 expansion will commence immediately after Stage 1 project milestones have been achieved, while Stage 3 development is targeted for 2026, bringing the project to full production by 2028.

The development of all three stages is expected to cost $466-million, with the project to have a pre-tax NPV of $2.1-billion and an IRR of 43%, once in full production.

Allkem resulted in the A$4-billion merger between Galaxy Resources and Orocobre last year.