Lithium projects hit funding hurdle PAUL GARVEY RESOURCES...

Lithium projects hit funding hurdle

• PAUL GARVEY
  RESOURCES REPORTER
  
• 12:00AM NOVEMBER 10, 2018
• NO COMMENTS

The high cost of funding for lithium projects could put a brake on the rush of new supply coming into the burgeoning sector, according to Mark Calderwood, managing director of lithium producer Tawana Resources.
Perth-based Tawana has witnessed the cost of funding first-hand, recently agreeing to a costly $40 million debt package with Tribeca Investment Partners. According to analysis by Canaccord Genuity, the debt package has an all-in effective cost of about 22 per cent.
Double-digit interest rates have been commonplace among the new generation of lithium projects moving into development, and coupled with the recent weak investment sentiment towards the sector, they will make it hard for more lithium projects to progress.

“Funding is tough, it certainly makes it hard for new projects,” Mr Calderwood told The Weekend Australian.
“It was expensive for us, and new projects will find it very tough until probably two to three years away.”
Tawana’s latest funding package was designed to salvage the company’s merger with Singapore’s Alliance Mineral Assets, its joint venture partner in the Bald Hill lithium mine in Western Australia.
The proposed merger hit a big hurdle when the ASX ruled that Alliance couldn’t list in Australia — a key part of the deal — without satisfying the exchange’s “emphasis of matter requirement” by demonstrating that it could continue as a going concern.
The extra cash from Tribeca will help counter those concerns and clear a path to the ASX for Alliance. On Wednesday, the company announced that it and Alliance had agreed to reinstate an ASX listing for Alliance as a condition of the deal.
But the unexpected roadblock, coupled with a broader malaise across the lithium sector and some mixed production figures from Bald Hill, means Tawana shares have more than halved in value since earlier this year. It has also had to watch as its recent spin-off, Cowan Lithium, shelved plans for a proposed listing.
Despite the circuitous route towards the merger, Mr Calderwood said the Alliance deal still made sense for Tawana.
“It’s better to have all of Bald Hill in one company, it’s easier for people to understand, and it will give us a bigger market cap and make us more attractive for fundies,” he said.
“The bigger you are in these soft markets, the better.”
He admitted that the reshaping of the deal, and the need to pull in extra debt funding, had been frustrating.
“It was a technicality that was quite painful to be honest,” he said.
“No one wins. If they were forced not to list on the ASX, it doesn’t help the small Aussie shareholder. The small investor is the one that suffers, not the big guys, and it would’ve been no change to the situation Tawana is in anyway.”
Tawana shareholders are set to finally vote on the Alliance deal later this month, ahead of completion of the merger in mid-December.
There have been creeping signs of a turnaround in the lithium space, with WA lithium producer Altura Mining on Friday striking a big new offtake agreement with Chinese heavyweight Ganfeng Lithium and US company Albemarle Corp securing environmental approval for a $1 billion lithium hydroxide facility in WA’s southwest.
PAUL GARVEY

RESOURCES REPORTER
Paul Garvey has been writing about the resources industry for more than 14 years. Prior to joining The Australian's Perth bureau, he spent two years writing for the paper out of Hong Kong. He has also been a mi... Read more