Lake Resources NL Updates PFS for Kachi Lithium Brine Project with NPV Now US$1.58 Billion and Potential Production Increase Under Review

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Lake Resources NL (ASX:LKE) (OTCMKTS:LLKKF) has updated the pre-feasibility study (PFS) for its flagship Kachi Lithium Brine project based on revised lithium price estimates, demonstrating a stronger financial outcome than the original conservative PFS price assumptions.

The value of the Kachi project, as a net present value (NPV) after tax, increases by 110% to US$1.58 billion (A$2.1 billion), with an internal rate of return (IRR ) by 35% and an annual EBITDA of US$260 million (AU$350 million), using the updated lithium price forecast of US$15,500/tonne for battery-grade lithium carbonate.

The clean lithium developer is also evaluating the potential increase in lithium carbonate production at the Kachi project as demand continues to increase from battery manufacturers for high-purity products.

Financially sound project

Lake Resources Managing Director Steve Promnitz said, “The updated lithium prices demonstrate how financially strong the Kachi project is, which could potentially be improved with an expansion in production.

“Significant new production is needed to meet the projected growth in demand for electric vehicles and energy storage over the next 10 years.

“The Kachi project remains highly scalable and the company is working on an expansion, which would make it globally significant in terms of high purity lithium carbonate production, and well positioned to meet the expected shortfall in battery-grade products. over the next few years.

“This is an important differentiator for Lake as it continues to engage with key players in the battery materials supply chain and electric vehicle manufacturers.

“These participants are looking for a product that is high in purity, that can be scaled to meet demand, and that has a measurable ESG benefit. Lake ticks all of these boxes.

Shares were up to 10% higher in early trade at A$0.385, while LKE’s market capitalization is around A$355.1 million.

Funding

Joint Financial Advisors have been appointed to structure and arrange project financing, with an emphasis on Export Credit Agencies (ECAs), for the development of the Kachi Project.

SD Capital Advisory Ltd and GKB Ventures Ltd have been appointed and are focused on securing project finance for resource companies in developed and frontier markets with a history of accessing government-backed programs including ECA funding .

Once project debt financing is applied, free cash flow should improve.

Confirmation of project debt support from export credit agencies on a basis of approximately 70/30 debt/equity should provide comfort for the equity investment required.

Potential buyers

Discussions have been ongoing for some time with players in the battery materials supply chain, including potential buyers, commodity traders, battery manufacturers and electric vehicle companies, which should result in adequate purchase agreements prior to the completion of project financing.

Support for the project has increased since the quality of the product was confirmed and later proven in a half battery cell.

Production schedule

Production is expected to be ramped up in the first six months to 25,500 tonnes per annum (tpa) of battery-grade lithium carbonate, after which production will remain constant for 25 years.

The design of the plant in the PFS targeted the production of 25,500 tpa of battery-grade lithium carbonate through brine processing with direct lithium extraction technology based on ion exchange (IX).

The diagram consists of two sections:

  • Direct lithium extraction according to Lilac Solutions Inc, uses ion exchange to produce a lithium-enriched eluate; and
  • The lithium carbonate plant converts the eluate into refined lithium carbonate.

Trial work

Test work by Lilac and Hazen Research has demonstrated that a 99.97% lithium carbonate product with low impurities (battery grade) can be produced by the Lilac process within a few hours of extraction.

Operating costs can be reduced by replacing most of the gas supply with solar PV (+/- wind power) backed by battery storage.

An expanded plant design would be planned to increase production of battery-grade lithium products in the form of lithium carbonate or potentially both lithium hydroxide and lithium carbonate.

Next steps

The DFS is underway with Hatch and other participants using the PFS parameters as a baseline targeting 25,500 tpa of lithium carbonate.

Further engineering studies on reducing project operating and capital costs should indicate that operating costs can be reduced by replacing most of the gas supply with solar PV (+/ – wind power), supported by battery storage.

A reflection is underway on the outsourcing of the supply of hybrid solar energy, with a supply contract guaranteed over time.

An expansion would be assessed to begin after full capacity has been achieved from the initial production of 25,500 tpa of lithium carbonate equivalent (LCE).

Additional drilling will be undertaken to support the expansion scenario to enable the conversion of a portion of the inferred resources to the measured and indicated mineral resource category.

This should take place at the DFS stage, during the process of converting resources to reserves.

Further studies will be conducted on the feasibility of producing lithium hydroxide on site.

Initial studies will be conducted in-house with detailed financial studies carried out by independent third-party appraisers.

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