fbpx

(ASX: LKE) | LAKE RESOURCES

Jun 27, 2022

Sentiment: Sideways

Type of Trade: Speculative

Industry: EV(Electric Vehicles) - Lithium

Sector: Materials

Lake Resources NL is a lithium developer utilising clean, direct extraction technology for the development of sustainable, high purity lithium products from its flagship Kachi Project (4.4mt LCE resource), as well as three other lithium brine projects in
Argentina. No mining is involved in the brine processing.

Lake Resources currently hold four projects in a prime location within the Lithium Triangle, where 40% of the world’s lithium is produced at the lowest cost, include Lithium Brine Projects (Olaroz/Cauchari, Paso, Kachi), and Lithium Pegmatite Project (Catamarca). Lake Resources hold the largest lithium lease in Argentina which is 100% owned and operated by the Company.

In April 2020, Lake announced compelling pre-feasibility study (PFS) results for Kachi, showing its potential to become a long life, low cost operation with an annual production target of 25,500 tonnes of battery grade lithium carbonate using direct extraction technology. The results showed a high margin project, with an EBITDA margin of 62%, together with competitive capital and operating costs with the next steps for Kachi include delivering product samples from Lilac’s pilot plant to potential off-takers; targeting lower upfront and operational costs, such as through using environmentally friendly solar power; and further resource development to extend the project’s life, in addition to financing and off-take discussions.

Kachi Project

The whole idea of Kachi production is to replace 20-30km2 of Evaporation Ponds by using a different technology than most of lithium producers, Lilac Ion Exchange to produce high purity lithium carbonate. The production uses only one building with Ion Exchange Modules that is highly scalable and much faster to built it has been proven in pilot plan to be effective.

The advantages using Lilac Ion Exchange for Lithium extraction are:

  • Displaces evaporation process
  • Faster process and faster to market
  • High recovery
  • Sustainable with lower water and land impact compared to other processes.
  • Cost competitive and mostly important, Scalable.

✅ The company claimed to be be able to achieve strong financial result.

✅ Company is currently in transition from developer to producer, hence bringing a team with extend experience in Production.

✅ Company is currently setting up a corporate office in New York with plans for further stock market listing.

✅ Apparently there is no technical issues in the company that is reportedly related to the departure of the CEO Steve Promnitz. Steve was also managing director of the company.

✅ The company is currently completing its facility in Argentina to start producing from demonstration plan. at the moment th

✅ Lithium prices still trading close to at all times high, as well as concerns about supply.

✅ Demonstration plant to be commissioned in middle of July.

✅ Lake Resources has recently converted some options and is now in relatively Strong financial position.

✅ Discussions advanced with potential offtakers and electric vehicle makers due to the consistent high quality of the Kachi lithium product, together with a low CO2 footprint and small environmental footprint. If the event the announcement is made, has helped SP to spike during the last 6 months. With the current sell off we believe under 90c is a technically fair entry price for this stock.

✅ Favourable macro environment for EV. A carbon-free future will require many millions of batteries, both to drive electric vehicles and to store wind and solar power on the grid, it is strong likelihood that EVs will drive a lithium supply crunch as analysis warn that rising battery demand will constrain supplies.

🚩 Although the market has embraced LKE well during the last 12 months since the projects are showing promising results, it is important that investors or traders are aware that the company does not generate any revenue with increased net loss YoY. Exploration companies dependent of constant capital rising and share dilutions to ensure they stay alive. Hence, as well as Sayona Mininig previously analysed are extreme high risky stocks to invest and or to trade and stocks should be at all times be bought under or around the SMA levels in order to mitigate the risk of a SP crash after the market hype.

🚩 Although – Ford & Hanwa (Japan Inc) are the major long term Offtakers, there is non-binding MoU with Lake on offtake proposals. Each MoU up to 25,000 tones/yer lithium carbonate or hydroxide over 10 years from Kachi Project.

Kachi Financial Metrics as per last Pre-Feasibility Study results back in 2020 at 25,500tpa and the Definitive Feasibility Study at 50,000tba – results to be much improved.

Interesting enough the price assumed of the lithium carbonated at pre-feasibility study was US$15,500, whereas the currently price is sitting around US$46,640 per tonne in June 2022.

✅ With UK Export Finances and Canada EDC – Export Credit Agencies Support 70% of the total support required.

🚩 Short traders in the market: since LKE is now incorporated within the ASX200 there is now the risk of short traders attack. We remain positive as long as demand for lithium and lithium prices are high. We believe that short traders in the market will increase the stock price swings offering even better opportunity to trade LKE.

Timeline

It is extremely important for investors to have clear understanding of the timeline of the project. Lake Resources aims to produce in 2024 with Q3 2022 to be a key quarter for Lake followed by commencement of construction and approvals by Mid-late 2022.

Catalytic announcements are set to be made all through this next few Quarters of 2022 as well as the new CEO .

Although recent 67% fall from its all times high, mostly generated by the hype on the lithium sector and the listing of LKE in the ASX200, the stock has still gaven investors incredible return of 135% in the last 12 months.

Since the departure of Lake Resources Stephen Promnitz, the stock has fallen over 45% in less than a week offering a great opportunity to buy at technically discounted prices.

We believe that demand for lithium is set to increase and despite recent Goldman Sachs bearish report, lithium carbonate is still taking a massive supply issue. History shows that supply and demand theory has always worked.

When to buy? Investing VS Trading (VIP MEMBER AREA)

:

:

:

The information provided by BG Trading to you does not constitute personal financial product advice. The information provided is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. BG trading recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Past performance of any product discussed is not indicative of future performance. (We urge that caution should be exercised in assessing past performance. All financial products are subject to market forces and unpredictable events that may adversely affect their future performance).