Welcome to Lake Resources' investor newsletter. In this October 21, 2021 issue: Lilac deal highlights need for sustainably produced lithium Lithium prices hit record high as EV revolution accelerates 'Lithium Triangle' attracts new M&A deals New Lake research, media and events for investors -------------------------------------------------------------------------------------------------------- Lilac deal highlights need for sustainably produced lithium It’s an exclusive, multi-million dollar club and it is getting bigger and better by the day. With a number of blue-chip investors now funding the lithium supply chain, the limited potential for increased supply and the strength of demand for sustainably produced lithium has become obvious. German automaker BMW, Korea’s SK Materials and Presidio Ventures, a Sumitomo Corporation subsidiary, were among investors to have contributed to Lake technology partner, Lilac Solutions’ successful recent US$150 million Series B financing. Existing investors Breakthrough Energy Ventures, backed by leading sustainability investors including Bill Gates and Jeff Bezos, and MIT’s The Engine also participated in the funding round, which included Lowercarbon Capital and T. Rowe Price. Chris Sacca, Managing Partner of Lowercarbon Capital,commented: “I’ve been doing this a long time, but before Lilac, I’ve never seen a company whose product is 10,000x faster than the competition. Lilac’s success means much more affordable electric cars [and] hundreds of millions of tons less CO2 pollution.” California-based Lilac plans to use the funding to ramp up production of its ion-exchange technology, expand its teams of engineers and field operators and deploy its direct lithium extraction technology globally. “The lithium industry must innovate to meet the needs of battery and automotive companies, otherwise the transition to electric vehicles will be delayed,” Lilac CEO Dave Snydackersaid. BMW’s Wolfgang Obermaiercommented that: “By investing in Lilac Solutions, we are supporting technological progress in the field of lithium extraction, with a focus on responsible and sustainable methods.” “As automakers shift to battery power, concerns about national security, sustainability, and human rights have led to increased scrutiny of the lithium supply chain globally,” Lilac stated in its October 6 announcement. “Lilac is partnering with lithium brine resource developers to ramp production while protecting local communities and ecosystems.” Traditional brine evaporation to produce lithium requires 1-2 years to produce concentrate Lilac's direct extraction process, with potential to produce lithium concentrate within three hours Lithium demand soars Demand for lithium is expected to quadruple over the next decade, with prices already hitting record highs amid a lack of supply. With battery cell shortages becoming a growing issue for electric vehicle (EV) makers, an extra 189,000 metric tonnes of lithium will be needed by 2025 – more than the entire market consumed in 2015. A lack of lithium supply could result in nearly 19 million rechargeable EVs not being produced over the next decade due to battery-cell shortages, according to the Center for Automotive Research. Commenting on Lilac’s successful fundraising, Lake’s Managing Director, Steve Promnitz said:“The support from blue-chip companies for Lilac provides third party endorsement of the quality of the Lilac technology and its potential to sustainably extract high-grade lithium, more quickly and efficiently and without harming the environment. This reduces the perceived project and technology risks associated with our Kachi project. “With the supply gap widening by the day and the need for independent producers, Lake looks forward to working closely with Lilac to advance our flagship Kachi project and deliver the battery quality lithium the world desperately needs.” The financing followed Lilac’s formalrecent partnershipwith Lake Resources, with Lilac agreeing to contribute technology, engineering teams and an on-site demonstration plant together with US$50 million in funding. Under the September 22 agreement, Lilac can earn up to a 25 per cent equity stake in the Kachi project based on various milestones, demonstrating that its leading direct extraction technology process works at scale with high quality results, for the sustainable production of lithium. “Lilac's technology is truly disruptive as it has taken a non-mining tech solution, which cuts operating costs and boosts lithium recovery from our brines,” Mr Promnitz said. “The process is modular, producing high-purity lithium and can be ramped up quickly through pilot to commercial stages. This equity stake ensures a rapid commercialisation of the Lilac technology at the Kachi site.” Lake’s Chairman Stu Crow added: “With a successful capital raising; partnering with a leader in lithium processing that will place us in the bottom quartile on the cost curve; and getting an Expression of Interest for debt funding from the UK’s export credit agency (UKEF) and Canada’s export credit agency - it has been a busy few months for Lake. “We have all worked hard to align Lilac’s industry leading climate technology and our project funding in order to accelerate development and production of the resource. “We are closing the gap to being fully funded when you assume the DFS and other requirements for UKEF are met. There aren’t many near term lithium projects that can say they are funded to production.” --------------------------------------------------------------------------------------------------------- Lithium prices hit record high as EV revolution accelerates Just how high can lithium prices go? Major producer Ganfeng Lithium hasannounced plansto increase prices for lithium metal products by 100,000 renminbi (around US$15,500) per tonne due to power issues and rising costs in China. The move would take prices over the US$40,000 per tonne mark, according to Benchmark Mineral Intelligence’s (BMI’s) managing director, Simon Moores. Battery-grade lithium carbonate prices in China reached a record high of RMB 179,000 a tonne on October 11, according to Reuters, and have surged about 240 per cent this year on accelerating EV demand. Just a week earlier, BMI reported that prices of lithium carbonate had reached new,all-time highson the back of limited supply and sustained lithium-ion battery demand in China. Benchmark’s EXW China (Battery) grade of lithium carbonate rose by 26.5 percent to RMB 160,000/tonne (US$24,800) in the final two weeks of September 2021, surpassing the previous high of US$24,750/tonne for battery grade lithium carbonate assessed on 30 March 2018. “Looking forward, record high spot transactions are likely to incentivise a strong upward revision of contract prices in Q4 as new deals and pricing breaks are negotiated for the start of 2022,” BMI said in its October 6 report. “Historically, supply contracts are negotiated in Q4 and can be influenced by sentiment in the spot market. It is this revision that sparked the surge in lithium chemicals pricing in 2015, indicating that the start of 2022 could see further momentum in price rises.” The consultancy pointed to bullish times ahead, too: “Fundamentally, with little foreseeable downside price risk to carbonate or hydroxide pricing in the near term, as demand continues to outstrip raw material and chemical supply, the lithium industry is well and truly in the throes of its latest price rally, with further record prices expected in the coming months.” The price rises have followed projections from analysts including BMI, Macquarie and J.P. Morgan that lithium supply is struggling to keep up with demand. A “perpetual deficit” is in prospect beyond 2030 until more projects are developed. Ford hits the pedal as EV sector speeds up Adding to the demand pressures, onSeptember 27, U.S. automaker Ford Motor Co. announced the largest ever U.S. investment in EVs. Together with its partner, SK Innovation, the U.S. automaker plans to invest US$11.4 billion, including a battery manufacturing complex in central Kentucky and a mega campus in Tennessee. The investment adds to Ford’s already announced US$30 billion investment in EVs through to 2025, with the automaker expecting 40 to 50 per cent of its global vehicle volume to be fully electric by 2030. The announcement followed strong demand for the new Ford F-50 Lightning truck, E-Transit and Mustang Mach-E EVs, with Ford also planning to expand capacity at its vehicle centre in Michigan. “This is our moment – our biggest investment ever – to help build a better future for America,” said Jim Farley, Ford president and CEO. “We are moving now to deliver breakthrough electric vehicles for the many rather than the few. It’s about creating good jobs that support American families, an ultra-efficient, carbon-neutral manufacturing system, and a growing business that delivers value for communities, dealers and shareholders.” Ford is not alone though, with General Motors announcing plans to invest US$35 billion in EV development between 2020 and 2025, and Stellantis, the world’s fourth-biggest automaker, set to invest more than US$35 billion through 2025 on electrifying its line-up. These moves by U.S. automakers add to the multi-billion dollar investments announced by German automakers BMW, Daimler-Benz and Volkswagen, on top of those by Elon Musk’s Tesla. Adding to the burgeoning EV sector, Polestar, a joint venture between Volvo and Geely, aims togo publicwith an enterprise value of US$23 billion. Polestar aims to sell around 290,000 vehicles per year by 2025. Another EV start-up, Rivian has filed for an initial public offering, which reportedly could result in a valuation of up toUS$80 billion. The U.S. automaker aims to produce 200,000 vehicles annually by 2023. What do these moves by Ford and other EV makers mean for the lithium industry? "Ford is in the same boat as everyone else," Caspar Rawles, head of price and data assessments at Benchmark Mineral Intelligence, toldS&P Global Intelligence. "They're all going to be vying for the materials, which are expected to fall into deficits or already are in deficit. You're going to see a surge in demand, and we haven't had a corresponding uptick in new supply." The United States is increasingly becoming aware of the importance of securing battery materials supply from its international allies, together with the need for international ESG standards. Recently, the Wilson Center, a non partisan think tank based in Washington DC, released a detailed report on the supply of critical minerals: “The Mosaic Approach: a Multidimensional Strategy for Strengthening America’s Critical Minerals Supply Chain.” Many of Lake’s peers were interviewed as part of this report’s preparation. As noted by Morningstar analyst Seth Goldstein, “The raw material shortage is the biggest risk to electrical adoption out there in the market today." For companies such as Lake Resources with a sustainably produced, battery-quality product, the timing couldn’t be better. --------------------------------------------------------------------------------------------------------- 'Lithium Triangle' attracts new M&A deals Home to Lake’s key projects, the ‘Lithium Triangle’ is attracting even more investor attention as lithium merger and acquisition (M&A) deals heat up. OnOctober 9came news that China’s Zijin Mining was acquiring Canada-based Neo Lithium Corp. for C$6.50 per share in cash, with a total cash consideration of C$960 million. Just a year prior, the TSXV-listed company was trading at C$0.60 per share. A May 2019 pre-feasibility study valued Neo Lithium’s Tres Quebradas (3Q) lithium brine project in Argentina’s Catamarca Province at US$1.14 billion (NPV). That equates to a purchase price of 70% of the project’s NPV, without the project being financed. “Neo Lithium's 3Q lithium brine project in Catamarca, Argentina is one of the largest and highest-grade projects of its kind in the world,” Zijin chairman Chen Jinghesaid. He added: “The 3Q project represents an important addition to Zijin's growing global asset mix and it is a good choice for Zijin to enter the field of new energy minerals.” The Neo Lithium deal followed last month’s move by Chinese battery maker Contemporary Amperex Technology Co (CATL) to acquire Canada’s Millennial Lithium in an all-stock cash deal worth C$376.8 million. CATL is also Neo Lithium’s third-largest shareholder. As reported inMay’s Ripple, the Lithium Triangle has seen other recent investments in 2021, including a move by China’s Ganfeng Lithium to establish a lithium-ion battery factory in Argentina’s Jujuy Province. German automaker BMW also signed a 285 million euro lithium supply deal in March with U.S.-based Livent from its Hombre Muerto lithium brine project, located just 80km north of Lake’s Kachi project. Also this year, ASX-listed lithium producers Orocobre and Galaxy Resources joined through a A$4 billion merger, with both having their largest lithium resources in Argentina. For Lake Resources, the increased focus on the Lithium Triangle, which accounts for around 40 per cent of the world’s lithium production, has heightened focus on the company’s projects. “Lithium assets in the Lithium Triangle are in strong demand, highlighting the region’s attractiveness with larger scalable assets and a low cost, reliable source of lithium supply,” Mr Promnitz said. “With our range of 100% owned projects including Kachi, Cauchari, Olaroz and Paso, we are in a prime position to ramp up production to meet demand, while producing in an environmentally sustainable manner through direct extraction technology.” -------------------------------------------------------------------------------------------------------- New Lake research, media and events for investors New investor research published on Lake has highlighted the potential value growth for shareholders as the company advances towards production. On October 12,Red Cloud Securitiesinitiated coverage on Lake, with a "buy" rating and a 12-month price target of A$1.25 per share. Mining analyst David A. Talbot noted Lake's advantages, including its clean lithium extraction with ESG benefits; high purity, battery grade product that exceeds industry standards; the green energy revolution, which is fuelling lithium demand; significant upside potential from Lake's planned production expansion; and Lake's strong management team. "Lake trades at a discount to peers on a P/NAV basis (0.40x vs. peers at 1.21x). As Kachi is de-risked further and inches closer to production, we expect this valuation gap to close," Talbot said. Earlier, on September 28,AllianceGlobalPartnersannounced a “buy” rating and 12-month price target of A$1.30 for ‘LKE’ shares, following the additional LOI (letter of intent) received for Lake from Canada’s export credit agency, following an earlier LOI from U.K. Export Finance. “In our view, the expression of interest from two separate lending agencies mitigates single-lender risk and serves as a vote of confidence with respect to Kachi serving as a clean source of lithium supply,” said analyst Jake Sekelsky. “In short, we believe access to low-cost fund through the aforementioned credit agencies should aid in the successful development of Kachi.” Meanwhile, on September 23,Corporate Connect published research projecting a 12-month price target of A$1.05, following Lake’s agreement with its key technology partner, Lilac Solutions. “Lilac brings a new-patented technology to the lithium brine industry and its direct investment further reduces perceived funding and technology risk and increases the likelihood of project delivery,” analyst Di Brookman said. “Lilac’s direct participation in Kachi is testament to their belief in their patented ion-exchange technology, which although new to the lithium industry has been used extensively in the water and uranium sectors.” Similarly, on September 23,Roth Capital Partnersreleased new research with a 12-month price target of A$1.10, reiterating its “buy” rating after the Lilac agreement. Lake has also been on the conference trail again, withrecent presentationsat Red Cloud’s "Oktoberfest" and Viriathus Capital's "Future Energy Conference," together with upcoming events including Noosa Miningand Benchmark’s Cathode and ESG conference. The company also continues to gain media attention, with recent reports in publications including the Australian Financial Review, Bloomberg, Reuters and Small Caps, among other publications. (Check our website for the latestmedia coverageandvideo interviews.) With the lithium sector heating up as the EV revolution accelerates, Lake is certain to remain in the spotlight as a leading, ESG-friendly lithium producer for the battery and EV sector. “Lake and its partners have never seen more interest as the world’s decarbonisation drive picks up speed. It’s vital for lithium supply to ramp up to meet demand and we’re focused on making this happen, quickly, sustainably and for the long-term benefit of all stakeholders,” Mr Promnitz said.