Lake Resources (ASX:LKE) Kachi Lithium Brine Project


by Rachael Jones

Lake Resources Limited (ASX:LKE) Managing Director Steve Promnitz discusses the company's Kachi Lithium Brine Project’s in Argentina, drilling results and work plan following its recent capital raising.

Rachael Jones: Hello. I’m Rachael Jones for the Finance News Network. Joining me today from Lake Resources (ASX:LKE) is Managing Director, Steve Promnitz. Steve, welcome back.

Steve Promnitz: Thank you very much Rachael.

Rachael Jones: Lake Resources is developing a number of lithium brine projects in Argentina. What can you tell me about these?

Steve Promnitz: We’re focused on Argentina and that’s because Argentina, and Chile produce half the world’s lithium. We have four projects there; three brine projects and a hard rock project. We’re currently drilling the brine projects and we’ll be getting a lot of news flow about results, resources, strategic partnerships, over this year. But the best thing is we’re located next to current producers, it’s not moose pasture and we actually have a proven value accretion path that we’ll be following.

Rachael Jones: Can you tell me more about the Kachi project?

Steve Promnitz: The Kachi is the one that we’re drilling at the moment; we have three drill rigs there at the moment. And we’ll be releasing results as we go through May, into September/October, that leads to a resource statement. What’s interesting about Kachi is that we own the entire basin, 100 per cent. And when we go and talk to strategic partners in Korea, in Mainland China and India, that’s the attraction. Owning an entire basin that has got lithium results and this has never been drilled before. We’re actually the first off and the reason for that is, it was owned by a number of different parties. So expect a lot of news coming down the path from Kachi.

Rachael Jones: Can you tell me about the approvals there?

Steve Promnitz: The approvals are now all in place. If we go back to last year, we were stepping through various hurdles. Now we have all of our approvals in place and that’s important, because we’re literally 80 kilometres down the road from one of the current producers. It’s been going for 20 years, so that’s put us in a good position.

Rachael Jones: Adjacent to Kachi you have two other lithium brine projects. What can you tell me about the timeframe for drilling there?

Steve Promnitz: As we move further north, there’s a known producer called Orocobre Limited (ASX:ORE), which is listed on the ASX. We have a project called Olaroz/Cauchari, which is literally right next to them, next to their production and also next to a development project by SQM (NYSE:SQM). What’s interesting about this is we signed a landmark agreement with the province, at the end of February. We’ve essentially been frozen out of these areas for two years, while we went through bureaucratic hurdles. Now we’re through that, we’re just finishing off community discussions and our approval to drill. And somewhere in the next few months, we’ll be drilling.

Why’s that important? People literally are sandwich shot across our lease boundary, are producing ore grade results at high flow rates, and I’ll be very surprised if we don’t produce something similar. And all of these other companies are 10 to 200 times larger in market capital than Lake, so there’s plenty of upside.

Rachael Jones: Now to your financials, you recently completed capital raising of $4.5 million. Who participated and what does this mean in terms of the timetable for your three projects?

Steve Promnitz: It’s very important, because we are now financed for this calendar year and most likely for the year that’s coming. The reason for that is with $4.5 million in the bank, we now have our drilling program and our resource development, and the drilling program that’s planned for Olaroz/Cauchari. And then during the year, we have options, which are in the money. And they presumably will convert and they’ll provide another $6 million or $7 million in August, and then again in December. So we’re reasonably well setup. And during that time, we then would probably sign some form of strategic arrangement, which will also assist future financing.

The people who participated are high net worths and the reason for that is we still have a market cap of around $35/40 million. But the advantage of that is we’re now positioned so that our next raising, or our next participation, would see institutions and a wider spread around the globe.

Rachael Jones: Your projects are based within the ‘lithium triangle’. What does this term mean and what is the importance of that?

Steve Promnitz: The lithium triangle is where, as I mentioned before, half the world’s lithium comes from. All of the largest producers are there, Arbemarle Corporation (NYSE:ALB), SQM, FMC Corp (NYSE:FMC) recently purchased by DuPont (NYSE:DD) and ourselves. Even the most recent new producer in the field is Orocobre, and they have gone from exploration to development and production. And we would see ourselves going down a similar, but perhaps a shorter timeframe to do the same thing.

Lithium comes from this part of the world and the other thing that is important is, its the lowest cost producers. The other 40 per cent or so comes from Western Australia from hard rock producers. And the benefit there is that the capital to open one of these projects is about the same, but the operating costs are generally lower in the lithium triangle.

Rachael Jones: Last question Steve. Why should investors consider adding Lake Resources to their portfolios?

Steve Promnitz: Electric vehicles are changing the way we live our lives. We don’t see it as much in Australia, but if you go to Mainland China, Hong Kong, to Europe, electric vehicles are everywhere. The proven technology at the moment is lithium iron batteries. Half the world’s lithium comes from Argentina and Chile; we are positioned right alongside current producers. Their market caps are $200 million or $2 billion; we have a market cap in the $30 million or $40 million range.

So there’s limited downside, significant upside, a lot of news flow coming this year and potential for strategic partnerships, which removes some of the finance and risk.

So I think there’s significant reason. And last of all recently in early May, we were actually trading just under our last capital raising price. So it’s an opportunity to actually get in under the institutions.

Rachael Jones: Steve Promnitz, thanks for the update.

Steve Promnitz: Thanks very much Rachael.


Rachael Jones

Finance News Network
Rachael comes to FNN after working for Fairfax Media covering international breaking news, including the global economy and politics. She joined FNN in February 2018. She has reported on Australia’s finance news for various organisations since 2000 and has also interviewed a number of key business players, including Bill Gates. Rachael has also worked across a number of countries, including the UK and the US.