The company plans to develop its 100% -owned Kachi lithium deposit in Argentina using Lilac Solutions Inc.’s patented direct lithium mining technology. First production is slated for early 2024.
Lake Resources NL’s Kachi Project (ASX: LKE) (OTCMKTS: LLKKF) has been reported by Corporate Connect as being well positioned to capitalize on the new EV megatrend in responsible sourcing lithium.
The report gave the company a 12-month price target of A $ 0.73 per share and highlighted the potential for a value of up to A $ 2.31 per share within three years as Kachi progresses, with reduced risk of expansion adding additional value.
Analyst Di Brookman said, “Using an NPV8 we value LKE on a risky basis at $ 0.98 / share today and trading at 75% of value gives a 12 month target of 0.73. $ / share.
“As announcements are made, the value of the project will increase, as will the 12 month goal. “As Kachi progresses through its list of catalysts, the model will decrease risk over time.
“Within 3 years, the value could increase to $ 2.31 / share, approaching its PFS value.
“Reducing the risk of an expansion option could add additional value.”
Revolutionary lithium extraction technology
The report said, “LKE uses revolutionary lithium mining technology to produce lithium for sale in the United States, Europe and Asia.
“With its cleantech partner Lilac Solutions, LKE is moving quickly to bring to market a project that is low in carbon, water, waste, acid-free, low footprint, low cost and high added value.
“With the DFS scheduled for early 2022, construction could begin in mid 2022 and production of high purity lithium could begin early 2024.”
Kachi’s emissions, water and waste footprint will be small and no extraction or evaporation ponds are required and its 99.97% battery-grade lithium carbonate, which improves battery performance, is expected to fetch higher prices in a rising market.
Demand could quadruple by 2030
The report notes that Benchmark Minerals Intelligence (BMI) expects global battery capacity to grow from 184 gigawatt hours in 2018 to just over 3,000 gigawatt hours by 2030 – and lithium production is expected to drop from 0, 3 million tonnes in 2019 to around 2.4 million tonnes. per year by 2030 to meet this demand.
“As product demand has not been matched by capital investments and with lithium, demand is expected to quadruple by 2030 and if all cars on the road today converted to LIB then lithium is expected to quadruple. be multiplied by 30.
“With recent supply reductions and delays due to COVID-19, the market has not developed a new supply to meet demand in the medium term, which will put continued upward pressure on prices.
“To cope with this reality and given that lithium is the central tenant of cathode chemistries, the demand for battery cells with less expensive components like nickel, cobalt and aluminum will likely increase.
“With most of the existing lithium production under contract, it is clear that many new projects need to be developed and quickly.
“Hard rock is faster, but not with the benefits or the increased direct mining of lithium. “We suspect that more of these types of lithium mining projects will occur due to a greener and less expensive footprint.”
ESG premium pricing outlook
Very high quality lithium with a high ESG footprint would likely receive a higher price in a tight world of green lithium carbonate, with a paradigm shift towards the megatrend of e-mobility driven by ESG / green investments and the desire to locate supply chains as soon as possible.
However, with almost no development in recent years, the market is not ready to meet the demand and this is reflected in increasing pressure on prices.
Currently, lithium prices are rising sharply in China and with few projects under construction or expanding, it is considered that buyers could pay a premium of around US $ 3,000 / tonne for cleaner, high-quality lithium to use. in the battery cathodes.
BMI expects global prices for battery grade lithium carbonate to peak at around US $ 16,100 / t in 2024.
The company recently updated the Kachi Pre-Feasibility Study (PFS) to reflect a price increase of approximately 40% to US $ 15,500 / tonne over 25 years.
This increases NPV8 110% to US $ 1.58 billion or A $ 2.02 billion, with Lake currently trading at A $ 324 million, or just 18% of Kachi’s NPV.
Potential for scaling up and scaling
The Kachi project has an indicated JORC resource of 1.01 million LCE tonnes and an indicated and inferred JORC resource of 4.4 million LCE tonnes, and rising resources still exist as only 15% of the current lease has been explored.
In addition, there are other advantages to Cauchari (LKE 100%) which is close to the production assets of Ganfeng and Orocobre.
Potential for Phase 2 expansion exists if the current resource can be further enhanced by drilling currently underway.
At this stage, the project has sufficient resources to support 4 modular extensions each at the rate of 25,000 tonnes per year.
In a hurry
The report states: “ESG and e-mobility megatrends collide as investors seek low-emission, low-waste and socially responsible investments.
“The challenge is to find the investments that disrupt the idea that mining is a dirty business.
“Cleaner / lower emission footprints and high quality products are also in a better position to secure offtake deals and funding.
“A fact that has not escaped investors.
“LKE is one of those companies. ”
The company is currently funded until construction, which is expected to begin mid 2022, followed by 18-24 months of construction and production expected in early 2024.