Lake Resources stock price jumps on lithium drawdown and investment news

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The Lake NL Resources (ASX:LKE) The stock price is having a strong day.

In morning trading, shares of the lithium developer are up 6% at $1.05.

Why is the Lake Resources stock price higher?

Investors pushed Lake Resources’ share price higher on Wednesday after the release of a positive announcement.

According to the release, the company has signed a conditional framework agreement (CFA) with lithium battery producer SK On for the offtake of up to 25,000 tonnes per annum (tpa) of lithium from the Kachi project in Argentina.

This represents 50% of its planned production and will initially run for five years with an option to extend for another five years.

The drawdown will be priced according to an agreed market price formula based on the average price quoted during the quotation period.

In addition, SK On has agreed to acquire a 10% stake in Lake Resources through the issuance of new common shares. These shares will be issued at the volume weighted average price over 20 trading days prior to today.

As you noticed above, the agreement is conditional and will depend on the outcome of a number of conditions. This includes its definitive feasibility study, Lilac demonstration plant results, financial due diligence and product specifications.

Management commentary

Lake Resources Executive Chairman Stu Crow said:

CFA enters into a long-term strategic agreement with SK On, one of the world’s leading producers of lithium-ion batteries with a major growing presence in the North American market.

Crow also notes that it strengthens the company’s long-term shareholder base and adds to the equity component required for drawing down project development credit facilities.

SK On Vice President Jinsuk Ryu added:

SK On is very pleased to execute this CFA with Lake, a clean lithium developer, which can enable SK On to secure a stable lithium supplier for its US supply chain. Lake fits particularly well with SK On’s ESG policy, as it uses environmentally friendly direct lithium mining technology for lithium production. With this CFA, both parties will strengthen their mutual partnership to advance opportunities to secure sustainable sources of raw materials in the future.

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