Lithium developer Lake Resources [ASX:LKE] was one of the few small caps in the materials sector today that avoided the global sell-off as it reached a significant milestone in the completion of its Definitive Feasibility Study (DFS) for its flagship Kachi Lithium Brine Project in Argentina.
The company announced that it has successfully completed its Stage 1 extraction and injection tests, demonstrating the feasibility of its lithium carbonate process.
The company shares have rallied since the low hit in early August, with the share price up by 3% today, trading at 25 cents per share.
The company has had a challenging year, as previous operation and planning updates have shown a host of difficulties.
Essentially, the company had stated that there would be less total lithium, the production would come later, and profit margins were being squeezed.
This information compounded general scepticism for the alternative method of extraction the company was pursuing and pushed the share price down 81% over the past 12 months.
But with the latest news, where is the company — and its shares — headed next?
Source: TradingView
Lake Resources pumps
Lake Resources shares spiked by 9% today, now trading up 3%, after announcing successful stage 1 extraction and injection tests at its Kachi Lithium Brine Project in Argentina.
The tests demonstrated the viability of the company’s lithium extraction method, direct lithium extraction (DLE) at Kachi.
DLE is an already proven method of extraction that utilises large pumps to extract brine from the basin aquifers to a processing unit where the lithium is absorbed. Then, the brine is reinjected into the aquifers.
The process is considered the most environmentally friendly extraction process. Aquifers aren’t depleted through usual evaporation methods or hard rock mining, so production has a lower carbon and water footprint.
According to Lake CEO David Dickson, the company said the tests ‘proved the concept of extraction’ and that ‘the extraction and injection testing confirms highly favourable reservoir hydraulic properties and allows us to optimise the future wellfield’.
Mr Dickson continued:
‘The tests represent a significant milestone for the project, as they provide important data and higher confidence for our modelling, which is essential for the completion of our DFS for Phase 1. The results are indicative of high-yield, production-scale, extraction wells in the core resource area.’
While the DLE method was not groundbreaking, observers had been worried about the reservoir’s ability to withstand the brine water table during pumping.
The injection tests also shed light on the lithium concentration within the brine, with samples showing improved concentrations.
The average concentration from the test wells was 263 mg/L, indicating the project’s potential to yield valuable lithium resources.
Outlook for Lake Resources
Looking ahead, the company’s focus shifts towards detailed wellfield and injection design to support the DFS.
The positive outcomes of the Stage 1 extraction and injection tests provide a strong foundation for this next phase of development.
However, sceptics still remain that the project will meet shareholder expectations.
The DFS will review its 25 ktpa lithium carbonate goals (previously 50 ktpa) with the first production in 2027 (once 2024).
If it can regain some of the production goals set earlier, it may assuage fears for the project’s long-term profitability.
Central to concerns are the delays in production from the project could mean the company misses the window in the forecasted lithium boom.
Source: McKinsey & Company
With China’s economy lagging, these estimates could potentially understate the timeline in which supply begins to outstrip demand, as huge investments seen in lithium production could result in a supply glut that would strip the project of its crucial margins.
As the company advances towards completing its Definitive Feasibility Study, these achievements should still be celebrated as it scores a big win. However, risks remain on the far horizon.
Lithium is not the only metal required for a renewable-based economy in the future.
Copper is a critical mineral for producing electric vehicles, solar panels, and other renewable energy technologies.
And we’re at risk of not having enough.
Copper supply shortage looming
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Recent studies have predicted that there will be a 6.6 million metric ton supply shortfall by 2031.
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Its demand is expected to continue to increase in the coming years.
This could lead to shortages of copper, which could disrupt the global economy.
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