German export credit agency Euler Hermes has confirmed in a non-binding letter of interest the potential for a guarantee on a loan of up to $270-million for UK-headquartered Savannah Resources’ Barroso lithium project in Portugal.

Euler Hermes has confirmed “eligibility in principle” for Savannah to receive an untied loan guarantee (UFK) for up to $270-million for construction of the project.

This potential funding support is based on the supply of lithium to Germany through Savannah’s offtake heads of terms with AMG for 90 000 t/y spodumene concentrate for ten years.

Germany would guarantee 80% of a UFK-covered loan.

Along with Savannah's strategic partner AMG, KfW IPEX-Bank supported Savannah in this UFK process.

Savannah says it welcomes this potential funding which represents a significant milestone in establishing a full financing solution for the project, and that it will continue pursuing this, along with other potential sources of funding until that is achieved.

“We are pleased to announce this endorsement of the project and key step towards putting in place a full project financing solution. The possibility of obtaining a substantial portion of the project’s overall finance under this longstanding German government loan guarantee scheme makes the debt funding of the project more attractive to financiers and offers the chance of lower interest costs.

“The support from the German government and global Tier 1 bank, KfW IPEX-Bank, clearly underlines for all stakeholders the project’s strategic significance and the responsible approach Savannah is taking to its development,” says Savannah CEO Emanuel Proença.

“Debt funding represents a key element in the project’s overall funding solution, and work is progressing well on complementary sources of funds, including funding from other government / supranational bodies (grant, equity, debt), and additional potential offtakers and strategic investors. There remains significant work ahead to take the project to construction and production, but Savannah is demonstrably moving forwards with great confidence and purpose,” he adds.

Savannah, KfW IPEX-Bank, and AMG shall move into the “project financing stage” of KfW IPEX-Bank’s and Euler Hermes’ processes.

This involves due diligence being undertaken by KfW IPEX-Bank, Euler Hermes and its advisers including technical, legal, and environment, social and governance matters before any potential loan and related terms can be confirmed.