Savannah Resources has received its first non-binding financing proposals for the Barroso lithium project in northern Portugal, marking a significant step toward securing the funding needed to move the development from feasibility into construction.
The initial proposals are indicative and do not yet represent committed debt. Savannah is now working with a shortlist of European and international lenders that have started detailed technical, environmental, social and legal due diligence. The company expects to receive conditional financing proposals by the end of 2026, although the terms of the potential debt facilities, including loan size, maturity, interest costs, security requirements and completion guarantees, have not been disclosed.
Barroso Requires More Than US$400 Million in Initial Capital
Savannah’s Phase 1 definitive feasibility study puts initial project expenditure at approximately US$417.5 million including contingency, compared with US$377 million before contingency. Portugal has already awarded the project a government grant of up to €110 million, reducing the disclosed construction requirement excluding contingency to approximately US$283 million.
The grant does not cover all project costs. Around €82.25 million is allocated to initial construction expenditure, while the remaining support is linked to operating milestones.
Savannah will therefore still need to secure funding for the approximately US$40 million contingency, working capital and expenditure that falls outside the grant’s eligible categories. The company is also exploring additional support from Germany. Discussions are continuing with KfW IPEX-Bank and export-credit agency Euler Hermes regarding a potential German government-backed loan guarantee and related debt facility. The discussions originated from Savannah’s non-binding offtake agreement with AMG Critical Materials, but neither a government guarantee nor a KfW loan has yet been approved.
Offtake Agreements Could Strengthen the Financing Case
Alongside the lender process, Savannah is working to strengthen Barroso’s commercial position. The company is negotiating with potential counterparties for a second spodumene offtake agreement, which would complement its existing non-binding arrangement with AMG.
Savannah has also secured non-binding letters of intent covering potential demand for up to 865,000 tonnes a year of ceramic and industrial by-products. That compares with the 600,000 tonnes per year assumed in the feasibility study, which used a weighted average selling price of approximately US$27 per tonne.
The by-products are expected to account for only around 5% of total project revenue, but they could have a greater operational significance by reducing waste volumes and associated storage requirements. Binding offtake contracts would provide lenders with more reliable future cash-flow visibility. The current letters of intent, however, are not equivalent to enforceable sales agreements and therefore do not yet provide the same financing value.
Barroso Offers Strong Project Economics but Lithium Prices Remain Critical
The planned operation is expected to produce an average of approximately 183,000 tonnes per year of 5.5% lithium-oxide spodumene concentrate over an initial 14-year mine life. Savannah’s feasibility study estimates an unlevered post-tax NPV of US$913 million, an IRR of 43.2% and a payback period of approximately 1.9 years.
The study is based on an average spodumene concentrate price of US$1,788 per tonne. These projected returns could provide significant potential debt capacity, but the financing case remains exposed to changes in lithium prices, construction costs and execution risks. Environmental and social factors are particularly important at Barroso. The project has faced community opposition and legal challenges linked to its strategic-project status, meaning lenders are expected to scrutinise permitting, environmental impacts and stakeholder relations alongside the technical feasibility of the mine.
Financing Now Becomes the Key Milestone
Savannah is targeting construction preparations during 2027, with production expected to follow. The arrival of initial lender proposals represents progress beyond preliminary market discussions, but the project remains some distance from financial close. The critical next steps will be securing binding offtake agreements, completing lender due diligence, obtaining firm debt terms and ensuring sufficient funding for contingency and working capital.
For Savannah, the headline value of the initial financing proposals is therefore less important than whether they can ultimately be converted into committed debt and combined with government support and commercial contracts to deliver a fully funded construction package for one of Europe’s significant new lithium projects.
