Outstanding position on a global scale
EcoGraf Limited (ASX: EGR; FSE: FMK; OTCQB: ECGFF) has achieved an important milestone towards obtaining credit cover on behalf of the Federal Republic of Germany for its Epanko Graphite Project in Tanzania. The company announces that the preliminary review by the German government’s Interministerial Committee (IMC) of the proposed loan of up to US$105 million for the development of the Epanko Graphite Project has resulted in a positive outcome. After reviewing the detailed application submitted by EcoGraf, the IMC has confirmed on a non-binding basis that the Epanko Graphite Project is in principle eligible for cover under the Federal Republic of Germany’s Untied Loan Guarantee (UFK) scheme and that an appraisal of the project and proposed financing arrangements is now required to obtain preliminary approval for a binding offer of cover. If defined due diligence criteria are met, credit cover can be provided in the name of the Federal Republic of Germany with a long maturity.
EcoGraf has engaged KfW IPEX-Bank to provide advisory, structuring and arranging services to obtain cover under the Untied Loan Guarantee Scheme (UFK Cover) and to arrange a senior credit facility (UFK Tranche) of up to USD 105 million for the construction of Epanko. Subject to satisfactory due diligence, credit approval and UFK coverage, KfW IPEX-Bank may act as the sole lender of the UFK tranche. The UFK program is provided by the Federal Republic of Germany through credit insurer Euler Hermes to incentivize the development of key projects that can secure a long-term supply of critical minerals for German industry.
Managing Director Andrew Spinks commented: “The positive outcome of the preliminary review is an important milestone in our Epanko financing program and our team is focused on completing the remaining project planning activities to support the submission for preliminary approval of UFK coverage and position our world-class Epanko graphite project for development.”
A key requirement of the UFK program is to promote the highest environmental and social standards during construction and operation. Epanko’s social and environmental planning programs will be developed to comply with the Equator Principles, a globally recognized risk management framework adopted by leading financial institutions to assess and manage social and environmental risks in new projects.
Compliance with these standards and the International Finance Corporation’s performance standards, as well as the World Bank Group’s environmental, health and safety guidelines, is critical to securing international financing support for new development and reflects the commitment of to ensure.
Conclusion: The German state can assume 100 percent of the risk for key projects that serve the long-term security of supply of German industry by granting loans and at the same time assuming the loan default guarantee. For this to happen, however, the projects must firstly be recognized as strategically important and secondly they must meet extremely high standards in terms of construction and operation as well as in the areas of environment, social affairs and corporate governance. The basic recognition that Ecograf's Epanko project is a key project for German industry is now in place. Ecograf now “only” has to show that it meets the required standards. Probably no other graphite project has been as thoroughly planned and optimized in all respects as the Epanko project. The (future) money from KfW certainly comes at a high price for Ecograf, but there is no alternative because projects of this kind are virtually impossible to finance on the private market. The reluctance of private lenders has nothing to do with the quality of the Epanko project - it is recognized as a world-class project. Rather, private lenders rightly fear the dominant market position of Chinese providers. There can be no question of fair competition when it comes to graphite (and other strategic raw materials): Chinese companies receive state support when needed and save themselves high standards, as in the case of graphite projects in Madagascar, for example. If (Western) industry wants to reduce its dependence on China, it needs the state willing to take the risks.
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