Orior Capital suggested a valuation of 29 cents per share, or about 9 times the current share price.
Lake Resources NL (ASX:LKE) (OTC:LLKKF) is incredibly undervalued according to a new research report from Simon Francis of Orior Capital, a former leading Asia metals and mining analyst with Macquarie, Credit Suisse and HSBC.
This research highlights the potential value of the Lake Kachi Lithium Brine Project in Argentina following the recently released Pre-Feasibility Study (PFS) regarding its sustainable and scalable direct mining process.
The Hong Kong-based analyst highlighted Kachi’s “significant and enduring competitive advantages”, including its ability to produce a 99.9% lithium carbonate battery-grade product with low impurities, based on a sustainable process, as electric vehicle (EV) manufacturers seek.
Francis’ research points to the production of the pilot plant module samples as a critical value enabler for Lake.
The report also highlights growing global demand for lithium as EV penetration increases, but supply challenges are expected to lead to growing supply shortfalls by the mid-2020s, particularly for products battery quality.
Valuation of 29 cents per share
Noting that “Lake looks incredibly undervalued,” Francis said: “Despite strong financial metrics, direct mining benefits and excellent long-term prospects for lithium, Lake Resources is trading at less than 2% the NPV.
“Canada’s Standard Lithium, which is also developing a direct mining project, is trading at around 20% of attributable NPV.
“In February 2020, Orocobre paid approximately 16% of the NPV to acquire Advantage Lithium.
“Valuing Kachi at 15% of the NPV and other Lake projects at, say, A$25 million, suggests a valuation of A$0.29 per share. That’s ~9x the current share price.”
Today, shares are up 14% to 4 cents and are up from 2.5 cents at the March 24 close.
Advancement of the pilot plant
Following Lake’s recent release of the Kachi PFS, the company has intensified discussions with downstream participants and backers.
Lake also processes lithium brine samples from Kachi at its technology partner, Lilac Solutions’ Direct Extraction Pilot Plant Module in Oakland, California.
Lilac has been limited to basic services while ‘shelter-in-place’ restrictions are in place, but there are currently plans to lift them next week, allowing Lilac to resume full operations and reopen other service providers, who are critical to Lilac’s operations.
Substantial investment in renewable energies
The importance of new projects capable of producing a battery-grade product has been highlighted by recent announced European investments in battery minerals, including France ($8 billion), Germany (more than billion) and the European Union ($88 billion). ).
China, the world’s biggest market for electric vehicles, also extended state subsidies and tax breaks for “new energy vehicles”, while Korea’s $110 billion “Green New Deal” du Sud includes substantial investments in renewable energies.
Electric vehicles have been prioritized when automakers reopen, according to industry discussions.