Up to 105 Million US Dollars for the Construction of Epanko

EcoGraf Limited (ASX: EGR; FSE: FMK; OTCQB: ECGFF) has achieved an important milestone for its Epanko Graphite Project in Tanzania on the path to credit coverage on behalf of the Federal Republic of Germany. As the company reports, the preliminary review by the Interministerial Committee (IMC) of the German government regarding the coverage commitment for the planned credit of up to 105 million US dollars for the development of the Epanko Graphite Project has led to a positive result. After reviewing the detailed application submitted by EcoGraf, the IMC has non-bindingly confirmed that the Epanko Graphite Project is in principle eligible for coverage under the Federal Republic of Germany’s Untied Financial Loan (UFK) guarantee system, and that an expert opinion on the project and the proposed financing arrangements is now required to obtain preliminary approval for a binding cover offer. Upon fulfillment of specified due diligence criteria, credit coverage on behalf of the Federal Republic of Germany with a long term can be provided.

EcoGraf has engaged KfW IPEX-Bank to provide advisory, structuring, and arranging services to obtain coverage under the Untied Financial Loan guarantee system (UFK coverage) and to arrange a senior credit facility (UFK tranche) of up to 105 million US dollars 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 the credit insurer Euler Hermes to create incentives for the development of key projects that can ensure long-term supply of critical minerals to 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 the promotion of the highest environmental and social standards in construction and operation. Epanko’s social and environmental planning programs are being 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 crucial for securing international financing support for the new development and reflects EcoGraf’s commitment to ensuring this.

Conclusion: The German state can take 100 percent of the risk for key projects that serve the long-term security of supply for German industry by granting loans and simultaneously assuming the credit default guarantee. However, for this to happen, the projects must first be recognized as strategically important, and secondly, they must meet extremely high standards in construction and operation, as well as in environmental, social, and corporate governance areas. The fundamental recognition that EcoGraf’s Epanko Project is a key project for German industry is now in place. EcoGraf now “only” needs to show that it meets the required standards. Probably no other graphite project has been so thoroughly planned and optimized from all angles as the Epanko Project. The (future) money from KfW certainly comes at a high price for EcoGraf, but it is without alternative because projects of this nature are virtually impossible to finance in the private market. The reluctance of private lenders has nothing to do with the quality of the Epanko project – it is admittedly a world-class project. Rather, private financiers rightly fear the dominant market position of Chinese suppliers. There can be no talk of fair competition when it comes to graphite (and other strategic raw materials): Chinese companies receive state support when needed and save on high standards, as seen in graphite projects in Madagascar, for example. If (Western) industry wants to reduce its dependence on China, it needs the state to take the risk.