(Updated 16/09/21) – (Asx: LKE) | Lake Resources

Aug 2, 2021

Sentiment: Bullish

Type of Trade: High Growth, 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.

The projects are 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.

The company claimed to be be able to achieve strong financial result from its latest pre-feasibility study:

✅ Lithium prices increased ~100% in battery grade lithium carbonate price (China) during the March quarter. This provides opportunities for organic expansion to deliver battery materials into the growing demand for electric vehicles.

✅ Strong financial results generated from a refreshed Pre-Feasibility Study for the Kachi Project, with US$1.6 billion NPV8 (post tax), 35% IRR and US$260 million annual EBITDA, using a flat forward lithium carbonate price of US$15,500/tonne.

✅ 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, it is very likely the SP will spike.

✅ The Definitive Feasibility Study (DFS) is underway aiming for completion in Q1, 2022. Project finance advisors were appointed to arrange substantial debt finance from Export Credit Agencies (ECA’s). Provided the study is positive, the market should have a very positive reaction out of this announcement.

✅ 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 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.

The stock is currently trading 43% above the SMA and it is trading at FOMO area, any entry at this current level with SMA sitting around 36c, poses very high risk to traders and we strong suggest to wait for the SP to enter into a strategy entry position once again.

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