How will a 150 million dollar loan help the US supply chain security for critical minerals?
Syrah Resources Limited (ASX:SYR) has announced that Twigg Exploration and Mining Ltd, its wholly-owned subsidiary, has received a $150 million conditional loan commitment approval from the board of directors of the United States International Development Finance Corporation (DFC). If completed, the DFC loan will fund capital requirements of the Balama Graphite Operations in Mozambique. Balama is the largest integrated graphite mining and processing operation globally. The proposed DFC loan is aligned with DFC's commitment to foster trade and investment deals between the US and Africa. Also, it represents the first DFC loan to a graphite operation, demonstrating the importance of Balama to bolstering the US supply chain security for critical minerals.
The DFC loan's approval is subject to the completion of due diligence, negotiation of detailed terms and legal documentation, DFC management approval, and Syrah and Twigg Board approvals. The loan will support the funding of capital requirements at Balama and will be for a maximum principal amount of US$150 million and a term of up to 13 years.
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Interest on the DFC loan will be fixed at applicable long-dated US Treasury rates plus a margin. Whilst the approval of the conditional loan commitment demonstrates DFC’s intention to support Twigg with a loan for Balama, there is no certainty that a loan from DFC will ultimately be provided to Twigg.
DFC's loan commitment is in line with the BidenHarris Administration's commitment to support development in Africa. It is expected to support feasibility studies for the development of Balama's vanadium resource, current and future expansion of Balama's tailings storage facility, as well as working and sustaining capital in Balama operations. Syrah has applied to DFC for loan funding since June 2021, with DFC's due diligence on Syrah commencing in September 2021.
Shaun Verner, Syrah Managing Director and CEO, stated that the DFC loan's approval demonstrates the importance of Balama to the critical minerals strategy of the US. He added that together with the US Department of Energy loan for the expansion of Syrah's downstream business, DFC loan funding would position Syrah as a strategic partner in bolstering the supply chain security for critical minerals required for electric vehicles and energy transition in the US. The DFC loan decision is still pending United States Congressional notification following its board approval.
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