Allkem share price higher on Sal de Vida lithium project update

This lithium miner's shares are rising on Friday…

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The Allkem Ltd (ASX: AKE) share price is on the move on Friday morning.

At the time of writing, the lithium miner's shares are up 3% to $14.76.

Why is the Allkem share price rising?

The catalyst for the rise in the Allkem share price on Friday has been the release of an announcement relating to the company's Sal de Vida project.

According to the release, Allkem and the International Finance Corporation (IFC) have agreed a non-binding term sheet for a project financing facility for the Sal de Vida Project in the Catamarca Province of Argentina.

IFC has proposed a US$200 million project finance facility to support Allkem's development of Sal de Vida stage one. The release notes that IFC's environmental and social performance requirements are globally recognised and will complement the ESG standards already adopted at Sal de Vida by Allkem.

Subject to finalisation of commercial terms and other key outstanding items, including final board approval, the facility is expected to be in place by late 2022.

Sal de Vida stage one

The Sal de Vida stage one project is designed to produce 15ktpa of predominately battery grade lithium carbonate. A feasibility study earlier this year estimated that the capital expenditure would be US$271 million and cash operating costs would be US$3,612 per tonne.

Stage one project economics include pre-tax net present value of US$1.23 billion at a 10% discount rate, pre-tax internal rate of return of 50%, and a payback period of 1.75 years from the start of commercial production. Construction commenced in January.

Allkem's managing director and CEO, Martin Perez de Solay, said:

We are already in a strong financial position to self-fund the Sal de Vida project however we saw an opportunity to further improve the financing structure for Sal de Vida and partner with IFC, an institution with decades of experience providing finance and sustainable business solutions in the mining space. Sal de Vida is expected to generate significant economy-wide benefits that will improve the fiscal outlook, economic performance and social outcomes at national, regional and local community levels.

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Motley Fool contributor James Mickleboro has positions in Allkem Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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