2021 and beyond, page-4884

A client on mine is non executive director of a respected Investment Management firm managing big instos,I asked for their opinion on Lake which they aren’t familiar with much but took the time to look into it and get back to me with some general questions I asked. Interested to hear others opinions, pretty much all known and obvious nonetheless.


Hi Tim
I had a look at the Orior Capital report- note this disclaimer on page 2 – “This document is a marketing communication sponsored by Lake Resources (LKE). “ It is not unusual for start-ups to get reports like these but note that Orior would have done very little independent research they are basically paid by LKE to put their name to this report which was probably majority written by LKE. Orior Capital is not a name I know but it appears they are based in Hong Kong. This is not unheard of behaviour for a start up who is trying to get traction in the marketplace but understanding that it is not like a UBS or Macquarie report is relevant. I see that Lodge Partners – who would be independent have released a broker report and note that their capex calculation on the project is $870m. LKE has $26m in cash pre capital raising with a market cap of $650m.IT is hard to say on the timing. If the EOI from UK Export Agency turns into a significant funding contribution for the development of the plant then that would be significant. I think what you have to be aware of is that you will need to continue to put up capital every time they do an equity raising otherwise you will get diluted. The current 2 part raising is in the market so that’s a good thing.Lilac Solutions technology is key to the success of LKE extraction timetable together with getting the debt funding in place. A realistic valuation estimate is a market cap of somewhere around $870m ie the $0.95 target Lodge have on it. Then if everything goes to plan it is how much investors are willing to push the stock price ahead of actual performance, which could be a lot if lithium prices increase further or LKE have a greater resource footprint than disclosed or the ore quality is better than estimated etc.Lilac has an impressive executive team and directors but I can see nothing on their website saying that their technology is being used by any producer as yet. So a lot riding on this especially the debt funding from the UK Export Agency which would be subject to clean technology. In the long term if the technology is not successful the lithium could be extracted using traditional methods.
Regards,
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