At the time of writing, shares of Lake Resources Ltd [ASX:LKE] are up by 17.33%, to 8.8 cents per share.
Why did Lake Resources Ltd shares do this?
The company confirmed lithium brine recoveries of roughly 80–90% from its Kachi brine project using Lilac Solutions’ engineering process. Lilac’s process produced more than 3,000 mg/L of lithium within a few hours. It also showed that a 300 mg/L lithium brine could produce similar final product (battery-grade lithium carbonate or lithium hydroxide) volumes to a 600 mg/L lithium brine.
Source: Lake Resources
What now for Lake Resources Ltd?
The share price chart remains lower than the 2018 high of 29 cents. That’s probably because lithium ― and resources ― remain out of favour. It’s also taken a few months for the company to drill its ground and prove rich-lithium. That said, Managing Director Steve Promnitz told the market on 22 October:
‘Kachi continues to produce favourable assay results which are consistent with and similar to the large lithium brine projects of Galaxy and Neo Lithium, also in Catamarca. The grades we are achieving at Kachi demonstrate to us that, based on the scale of Kachi at 50,000 hectares, we have a project that is commercial with significant upside.’
Past lithium brine results haven’t blown us away, which is possibly why the share price hasn’t moved that much. But the latest engineering results might start to change the company’s sentiment. Remember, Lake Resources controls a mammoth lithium lease in Argentina. It believes the project’s landholding is full of lithium brine and that should translate into a massive resource ― a potentially lucrative opportunity for shareholders, considering the latest engineering results.
Keep in mind, Lithium X’s nearby projects were acquired for CA$265 million during March 2018. The northern half of $892 million capped Galaxy Resources Ltd’s [ASX:GXY] Sal de Vida resource was purchased for US$280 million by POSCO in June 2018. Sal de Vida boasted a 1.1 million tonne lithium brine resource and is located roughly 100 kilometres north of Katchi.
Lake Resources could become a takeover target in the future.
That said, it’s strapped for cash at the moment, holding around $1.7 million in the bank at 30 June. And while it’s raised some money through its latest option underwriting, the company probably needs another capital injection from shareholders soon. In that case, unless it announces a world-class resource lithium brine resource or surprises the market with some high-grade assays, the share price might push lower in the weeks ahead.
The bottom line: we like the story’s potential, but would be more interested if the company held more cash on hand. That aside, the company’s future really comes down to the upcoming resource estimate. If it announces more than one million tonnes of lithium brine at Katchi, the share price could explode ― the market could anticipate another takeover target in the making.
Resources Analyst, Markets & Money
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