Under the CFA, WMC will acquire 10% of LKE at $1.20 per share to support the development of LKE’s Kachi Project in Argentina.
The offtake represents 50% of Kachi’s lithium production capacity on a 10-year initial term with an option to extend for a further five years.
LKE shares were up 5% late on Thursday.
LKE shares have been down 50% over the past six months.
Source: tradingview.com
LKE’s agreement with WMC Energy
On Thursday, lithium developer Lake Resources announced a CFA with WMC Energy.
The CFA concerns a potential offtake of up to 25,000 metric tonnes per annum (mtpa) of battery-grade lithium sourced from LKE’s Kachi project.
The agreement also includes an investment in LKE, which gives WMC a 10% stake.
Lake Resources states that the investment and offtake agreement will continue de-risk its project for its financiers and investors.
The CFA includes the 10% investment in LKE at AU$1.20 per share and an offtake of 50% of Kachi’s overall lithium production (up to 25,000mtpa).
The offtake is to have an initial term of 10 years, with an option to extend for a further five years.
Pricing is to be set at an agreed market price based on a discount on the average quoted price.
The CFA is conditional. The following conditions must eventuate to become binding:
‘Successful DFS being released.
‘Lilac Demonstration Plant having successfully operated for a certain period of time, producing certain volumes.
‘Successful and satisfactory completion of due diligence by WMC Energy.
‘Formal agreements, regulatory approvals and ASX waiver.’
What is interesting is the vague qualification of work associated with the Lilac demonstration plant. The plant must be operated for a certain period of time and produce certain volumes.
Neither the duration nor the volumes were quantified.
Once both companies are satisfied with the conditions, the CFA becomes unconditional.
Lake Resources says the investment will propel Kachi progress by strengthening the company’s longer-term shareholder base and injecting equity into the company’s drawdown debt facilities used for development.
LKE’s Executive Chairman, Stu Crow, stated:
‘The CFA delivers a long-term strategic alignment with WMC and its supply chain into its European and North American customers.
‘WMC Energy has a track record of being a market leader in nuclear fuels and expanded into battery materials including lithium to serve predominantly the US and European lithium-ion battery supply chain for EVs with their strategic needs.’
WMC’s Business Development Director Amrish Ritoe commented:
‘WMC is excited to support Lake Resources in its endeavours to make the Kachi Project a success. The engagement under the CFA will help Lake Resources expand its downstream footprint across the European and North American lithium-ion battery supply chain, enabling Lake to optimally benefit from the anticipated growth in demand for battery materials like lithium carbonate across these markets.
‘With ouqr extensive network in Europe and North America, we are well positioned to create a partnership with Lake and others that will help Lake to accelerate the development of the Kachi Project.’
Lake Resources’ lithium in the US and Europe
David Dickson, LKE’s new CEO, claims the CFA will enable LKE to ramp up production and open it up as an opportunity for further partners to participate in upcoming projects.
Mr Dickson stated:
‘Increasing customer and consumer scrutiny around the environmental and ethical credentials of lithium projects particularly from the European markets drives our focus on sustainable extraction.’
Lithium and EV adoption
In 2021, junior lithium stocks like Lake Resources were some of the top performers on the All Ords.
Now, however, LKE is well down from its 52-week high.
While trading in lithium stocks is less exuberant in 2022, demand for the actual white metal remains strong.
So are any overlooked lithium stocks still out there?
Our latest research report on the lithium industry suggests yes.
Get a free rundown of three Aussie neglected lithium stocks worth checking out here.
Regards,
Kiryll Prakapenka,
For Money Morning
