https://lakeresources.com.au/wp-content/uploads/2022/06/file_1504.pdf
Lake Resources’ share price fell 28% to A$0.97/sh overnight upon news
that it would be establishing North American head offices to assist in the
operations of its Argentine Li brine projects and better serve its off-take
customers and partners. Mr. Stu Crow was appointed temporary
Executive Chairman to oversee the appointment of a new CEO, board
members, and establishment of US offices. The executive search was
progressing well while engaging candidates with production, operations,
and market experience. We soon came to realize that previous MD, Steve
Promnitz, resigned unexpectedly on Friday. A third-party has reported
that he also sold his entire 10.2M share position. Steve had done an
excellent job in setting the strategic groundwork with an ESG focus for
Lake. While we were told that Mr. Promnitz was likely destined for a new
role within LKE, the transition to a North American CEO had been in the
works for about six months, and his sudden departure comes as a shock
to the Board. We view this share price correction as a great investment
opportunity to buy Lake Resources at a lower entry point. While CEO
departures are common as firms evolve into the construction and
production stage, rumors may emerge on Mr. Promnitz sudden
departure. Some may wonder if there are DLE or other technical or
financial de-risking issues. We suspect this is not much more than a
human resources issue, perhaps with a difference in opinion on the
head office location strategy. A transition process has been underway
for last six months. While moving into North American markets, the
Board decided to transition its corporate office into NA. With Argentine
projects, Hatch in Toronto, Lilac in CA and an off-take with Ford,
eliminating time-zone issues would help streamline the business.
Lake Resources has the largest land package in the Lithium Triangle with
four brine projects in Argentina, including flagship Kachi. While LKE has
financially de-risked Kachi through debt and offtakes, we note that the
upcoming DFS and pilot plant should help on the technical front.
• Hiring is underway with a short list remaining for CEO, plus building
out a non-executive high-profile and experienced board is ongoing.
• Resource update is due in mid-2022, and this would allow a FS update
in Q3-Q4/22, with the goal of doubling production to 50,000 tpa LCE.
• Demo plant construction is on track for a Q3/22 start-up. Concentrate
will be sent to Haizen in CO to convert to LCE.
• Ford and Hanwa discussions are progressing. A lot of interest in offtakes but no additional production is available.
• Cash is at A$150M having recently added A$62M via options.
We maintain our BUY rating and target price of A$3.15/sh. Our target
price is derived using a DCF to which we now apply a higher 1.0x multiple
to account for additional de-risking. Upcoming catalysts: 1) finalization of
the Hanwa and Ford offtakes (mid/22), 2) commissioning of a demo plant
(Q2/22), 3) resource update (Q3/22), 4) DFS and ESIA (Q2/22), 5) project
financing (H2/22), 6) assays from the brine projects (H2/22), 7) construction
decision (H2/22), and 8) production (H2/24).
L
CORPORATE UPDATE 21 June 2022
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Last
5.0¢ |
Change
-0.002(3.85%) |
Mkt cap ! $86.85M | |||
| Open | High | Low | Value | Volume |
| 5.2¢ | 5.3¢ | 5.0¢ | $205.1K | 4.009M |
Buyers (Bids)
| No. | Vol. | Price($) |
|---|---|---|
| 29 | 2017442 | 5.0¢ |
Sellers (Offers)
| Price($) | Vol. | No. |
|---|---|---|
| 5.1¢ | 17000 | 1 |
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| LKE (ASX) Chart |