Welcome to Lake Resources' investor newsletter. In this May 21, 2021 issue: IEA: Pandemic fails to dent EV sales Battery 'gigafactories' surge above 200 Lithium prices double in 2021 Argentina's lithium sector attracts new deals Lake in the media and on the conference trail -------------------------------------------------------------------------------------------------------- IEA: Pandemic fails to dent EV sales Electric vehicle (EV) sales surged in 2020, even while the global auto market shrank amidst the coronavirus pandemic. The latest report by theInternational Energy Agency(IEA) has highlighted how the seemingly recession-proof EV sector is set for even more growth ahead, requiring increased supplies of battery metals such as lithium. In its “Global EV Outlook 2021,” the Paris-based organisation reported there were 10 million EVs on the world’s roads at the end of 2020, with EV registrations rising by 41% last year despite global car sales declining by 6%. For the first time, Europe overtook China in new EV registrations, with 1.4 million new registrations compared to China’s 1.2 million, although China has the world’s largest fleet with 4.5 million EVs. Significantly, Europe saw EV registrations more than double despite a 22% contraction in its total auto market in 2020. The IEA attributed the EV sector’s resilience to three key factors: • Supportive regulatory frameworks: By the end of 2020, more than 20 countries had announced bans on the sale of conventional, internal-combustion engine cars or mandated all new sales be zero-emission vehicles • Additional EV incentives: a number of European nations increased purchase incentives and China delayed the phase-out of its subsidy scheme • EV model expansion and falling battery costs. Automakers stepped up to the plate too, launching 370 EV models in 2020, up 40% from 2019. Of the world’s top 20 vehicle makers, 18 announced plans to broaden their EV portfolio and rapidly scale up production of light-duty EVs, with some such as General Motors pledging an “all-electric” future. Model availability also broadened, with four major truck makers indicating plans to go completely electric. Ford recently announced its best-selling vehicle and light truck for the past two decades, the F-150, was going all electric, with the F-150 Lightning. The announcement was made byU.S. President Joe Bidenat Ford's Michigan plant. Despite being hit by the COVID-induced global recession, consumer spending on EVs reached US$120 billion in 2020, up 50% from the previous year. Governments spent US$14 billion on direct purchase incentives and tax deductions for EVs, up 25% from 2019. Nevertheless, the share of government incentives in EV sales has declined, falling from around 20% in 2015 to 10% last year, indicating that the vehicles are increasingly popular to consumers regardless of government incentives. EV sales have continued to rise in 2021, showing an explosive 140% gain in the first quarter on the back of strong sales in both China and Europe. U.S. sales also more than doubled relative to the first quarter of 2020, albeit from a smaller base. Looking ahead, the IEA sees a bright future for the EV market. Under current policies, total sales are expected to reach 145 million in 2030, accounting for 7% of the world’s road vehicle fleet. However, should governments take stronger actions to curb emissions, the global EV fleet could nearly double to reach 230 million by 2030, or 12% of the total fleet. This would reduce greenhouse gas emissions by two-thirds compared to an equivalent internal-combustion engine fleet. The IEA’s report follows a raft of announcements by automakers of plans to go “all-electric” or roll out more EV models, as the world’s clean energy drive shifts up a gear. For emerging lithium producers such as Lake Resources, the timing couldn’t be better. “EVs are rapidly going mainstream, contributing to a major reduction in greenhouse gas emissions and driving increased demand for battery metals such as lithium,” said Lake’s Managing Director, Steve Promnitz. “Notably though, forecasts project a growing deficit of battery-grade lithium required to meet this massive demand growth. This is where Lake’s clean lithium process via direct extraction has a huge advantage with its ability to rapidly produce a high-grade product on a sustainable basis and at scale. “We look forward to playing our own role in this clean energy revolution, expanding our production across our projects to supply this enormous new market.” --------------------------------------------------------------------------------------------------------- Battery 'gigafactories' surge above 200 Battery ‘gigafactories’ are being rapidly rolled out across Asia, Europe and North America as the world switches onto the clean energy revolution. From just three such factories in 2015, the number of such ‘megafactories’ reached 25 in 2018, 70 in 2019 and 181 last year. Now according to the latest research by industry analysts Benchmark Mineral Intelligence (BMI), the number of lithium-ion battery megafactories in the pipeline to 2030 has hit a new high of 208. Among them, 153 are located in China, accounting for US$180 billion of investment, followed by Europe with 21 and North America with 11. Australia has plans for its own gigafactories too, reportedly includingnear NewcastleandTownsville. Total capacity in the pipeline for 2030 has reached 3.4TWh (terawatt hours), which is expected to increase from 755GWh (gigawatt hours) of global capacity in 2020,according to BMI. The global battery “arms race” has intensified, with German automaker VW announcing plans forsix 40GWh cell plants in Europe.VW’s production capacity alone is more than the entire global industry consumed last year, with the factories to consume some two-thirds of 2020’s global lithium production. “It is important to note that this is not just a battery-powered, speculative gold rush as over half this pipeline – 122 plants – are already operational, with many of these ramping up production,” BMI said in its March 31 report. The analysts project that 77% of global lithium-ion production capacity will be located in China at the end of 2021, with China having 67% of global capacity by 2030 as Europe and North America ramp up production. The impact on demand for lithium and other key battery metals from this surge in battery factories is shown by the graph below. --------------------------------------------------------------------------------------------------------- Lithium prices double in 2021 Lithium prices have surged in 2021 amid the accelerating EV revolution and clean energy drive by the world’s major economies. In itslatest assessment, Benchmark Mineral Intelligence (BMI) reported that technical-grade lithium carbonate prices had risen by 114% since the start of the year, with battery-grade material up 103%. Prices for the respective materials were at US$12,700 per tonne and US$13,625, respectively. The lithium hydroxide price has also surged, rising by 44% this year to reach US$11,475 per tonne. Adding to the bullish outlook, Macquarie analysts have projected the overall lithium market will be in deficit from 2022, noting the bullish outlook for EV sales required a “substantial upgrade” in the lithium outlook. The latest price rises have demonstrated that the “bear market” for lithium from 2018-2020 is officially over. The Australian government’s official forecaster has reinforced the positive trend. In itsMarch quarter report,it projected that lithium hydroxide prices would rise from US$7,790 a tonne in 2020 to US$11,800 a tonne in 2026 (in real terms), with global demand for lithium expected to exceed 1 million tonnes (lithium carbonate equivalent) by 2026 as EV uptake rises further. Lake’s Managing Director, Steve Promnitz said the higher prices reflected a lack of investment in new capacity in recent years, with the market finally catching up to the lack of supply. “We have been saying for some time that supply would lag demand growth and that’s exactly what’s occurred, with prices now reflecting this economic fundamental. Put simply, we need around seven companies the size of SQM every year for the next decade just to meet the demand growth – there is enormous demand for battery-grade product, but just not enough supply,” he said. “Having demonstrated our ability to produce a high purity, battery grade product, we look forward to expanding our projects, not only at Kachi but also at Cauchari, Olaroz and Paso, becoming a globally significant producer of this crucial resource.” --------------------------------------------------------------------------------------------------------- Argentina's lithium sector attracts new deals Argentina also is attracting increased investor and industry attention as a centre for expanding low-cost lithium production. China's Ganfeng Lithium, one of the world's top lithium producers, hasannounced plansto establish a lithium-ion battery factory in Jujuy Province, in the north of Argentina. This is the same province where Ganfeng and Lithium Americas are jointly constructing their Cauchari lithium brine project, which will commence production next year, ramping up to 40,000 tonnes per annum of lithium carbonate. “We want to support the industrial development of Argentina to make it one of the most important lithium-producing countries in the world,” Ganfeng Chairman Li Liangbin said in a statement. Also in the 'Lithium Triangle,' German automaker BMW has signed a 285 million euro (US$335 million)lithium supply dealwith U.S.-based Livent from its Hombre Muerto lithium brine project, located around 80km north of Lake's Kachi Project. The deal is part of BMW's plans to accelerate its expansion of e-mobility, increasing its need for sustainable lithium supply for use in battery cells. By 2030, the automaker plans for at least half of its global sales to come from all-electric vehicles. "By sourcing lithium from a second supplier, we are securing requirements for production of our current fifth generation of battery cells. At the same time, we are making ourselves technologically, geographically and geopolitically less dependent on individual suppliers," said Andreas Wendt, a member of the BMW AG management board. Meanwhile, M&A activity in Argentina has increased with the recent A$4 billion mergerbetween ASX-listed lithium producers Orocobre and Galaxy Resources. Both companies have their largest resources in Argentina. "These moves demonstrate the South American nation will remain a centre for lithium production for decades to come," said Lake's Managing Director, Steve Promnitz. --------------------------------------------------------------------------------------------------------- Lake in the media and on the conference trail Lake has been in the spotlight in 2021 among investors and media amid an intensifying focus on the EV and battery storage revolution. Among recent events, Lake’s Managing Director, Steve Promnitz presented at theAustralian Energy & Minerals Investor Conference, the ‘Outback Conference’ and OTC Conference in the United States and more recently at the 121 Mining Investment Americas (April 27-29). The increased investor attention followed the release of research on Lake by Corporate Connect, entitled “The EV Megatrend – responsibly sourced lithium the ‘new oil’”. The report by analyst Di Brookman assigned a 12-month price target of A$0.73 per share for Lake, due to rising battery capacity forecasts, increased EV demand, ESG trends and rising lithium prices, together with the potential for further expansion of Lake’s projects. The full report can be accessedvia this link. Lake will also be back on the conference trail in coming weeks, including the following events: • Benchmark Mineral Intelligence’s “EV Fest” – “Actionable intelligence for the battery & EV supply chain,” June 1-5 (Lake's presentation is scheduled for June 1, from 8am London time) • Noosa Mining & Exploration Investor Conference, July 14-16, Noosa, Qld (Lake's presentation is scheduled for 11am Friday, July 16 (Qld time)) Lake looks forward to seeing as many investors as possible, either online or in-person at these upcoming events. The company has been active in the media too, including a recent video interview with ‘ASX Investor” which is capturing a growing audience of young investors, together with reports in Paydirt and other mining media (for more reports and interviews, pleasevisit our website). “Interest in Lake, lithium and the EV revolution is escalating and for good reason,” Mr Promnitz said. “Our product ticks all the sustainability and quality boxes and we are operating in the right location at the heart of the Lithium Triangle. There’s never been a better time to switch onto Lake as we ramp up our growth plans for 2021 and beyond.” For more on Lake's plans, please subscribe to our e-news via this link or follow us on TwitterandLinkedIn for the latest updates and industry information.