Why the Lake Resources (ASX:LKE) share price is jumping 11% today

This lithium explorer is now up 700% in 2021…

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The Lake Resources N.L. (ASX: LKE) share price has been a very strong performer on Wednesday.

In morning trade, the lithium explorer's shares are up a sizeable 11% to 64 cents.

This means the Lake Resources share price is now up a massive 700% since the start of the year.

Why is the Lake Resources share price charging higher?

Investors have been bidding the Lake Resources share price higher today after it released an update on the funding of its flagship Kachi Lithium Project. This clean lithium project is based in the Catamarca Province within the Lithium Triangle in Argentina.

According to today's announcement, UK Export Finance has provided a strong expression of interest to support approximately 70% of the total finance required for the Kachi Lithium Project. This is subject to standard project finance terms.

The UK Export Finance is the Export Credit Agency of the United Kingdom. In the last five years it has provided 14 billion pounds (A$26.4 billion) of support for UK exports and international trade.

The release notes that the project finance would deliver a significantly lower cost of capital than traditional financing structures, with the principal repaid over an 8.5 year period post-construction.

Though, it is worth noting that the expression of interest is not a binding commitment and is subject to a series of standard project finance terms and due diligence. This includes suitable structured offtake contracts, the successful completion of Kachi's Definitive Feasibility Study, and an Environmental and Social Impact Assessment (ESIA) to Equator Principles.

A "watershed moment"

Lake's Managing Director, Steve Promnitz, believes this is a major milestone, which goes some way to explaining why the Lake Resources share price is charging notably higher today.

He said: "This offer is a watershed moment for Lake – to have a leading ECA willing to indicate financial support for Kachi provides an enormous vote of confidence in our clean energy project. The support reflects not only Kachi's robust financials but also its considerable ESG benefits such as a small environmental footprint, satisfying a number of defined Sustainable Development Goals."

Mr Promnitz isn't resting on his laurels, though. He will be working hard to turn this expression of interest into committed funding.

He explained: "We acknowledge that we have significant work to convert this EOI into a committed funding arrangement. We are pleased that a number of international banks have already approached us who have expressed an interest to be part of Kachi's development and their interest is dependent on having a strong ECA like UKEF."

"Essentially this EOI is stating that if Lake does what it says it's going to do in the DFS and ESIA, the project will be funded. Combined with backing from potential international off-takers, investors will increasingly see progress towards successful production and expansion of Kachi, perfectly timed to meet the needs of a decarbonising world," he concluded.

The Lake Resources share price is now trading within sight of its record high.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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