Lithium play Lake Resources slashes jobs and puts assets up for sale

Brad ThompsonReporter

Jul 1, 2024 – 3.15pm

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Lake Resources, the ASX-listed mining hopeful with a flagship project located in Argentina’s lithium triangle, says it will have to slash jobs and sell assets as it faces lower commodity prices and searches for a development partner.

Lake told investors on Monday that it was trying to sell four other projects in Argentina to focus on the company’s flagship Kachi development. Lake chief executive David Dickson said those projects – Paso de Jama, Olaroz, Cauchari and Ancasti – were not core to operations. The company needs a partner for the $2 billion Kachi development.

Lake is also expected to cut its workforce from about 180 employees to just 20.

Argentina is part of the South American lithium triangle, a focus for explorers and developers of the commodity, including Lake Resources. Bloomberg

Lake enlisted Goldman Sachs in November to find either a major investor or offtake partner for Kachi, which is scheduled to start producing lithium in 2027.

Speaking on the sidelines of a conference in Las Vegas last week, Mr Dickson said the search for an equity or offtake partner was likely to drag on into 2025, warning lithium prices needed to be “a lot higher” for most developments to proceed.

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In a call last month, analysts at Wood Mackenzie said they expected lithium prices to remain “under pressure” until 2028 “given the projected supply surplus”.

Citi last week recommended that investors short lithium after a 5 per cent fall in Chinese carbonate futures to $US12,000 a tonne. Lithium prices have plunged more than 80 per cent in the past 12 months with growing concerns about oversupply.

Structural deficit

Similarly, UBS expects lithium prices to recover only after 2026, particularly as the slower take-up of electric vehicles hampers demand. “Despite the weak demand outlook, we continue to see new supply come to the market,” said the bank’s Dim Ariyasinghe.

Lake predicts an eventual shortfall of supply based on many of the hopefuls in the market needing price floors of at least $US15,000 a tonne to make projects economic.

“We, along with industry analysts across the sector, see a structural deficit of battery-grade lithium in the next five years,” Mr Dickson said.

“Because of that, we are taking all necessary actions to secure our financial flexibility, ensuring we maximise value for our shareholders from the Goldman-led strategic process.”

Despite the pessimism on prices, several Australian-listed groups are working on projects in Argentina, including Rio Tinto. Earlier this year, the mining giant said it would invest $350 million into its Rincon plant and hoped to begin production this year,

Lake continues to have the support of California-based Lilac Solutions, which has invested $US50 million ($75 million) in Kachi as it continues to work on low-cost extraction.

Lake shares traded unchanged at 4¢ on Monday, having fallen 32¢ since this time last year, giving the company a market capitalisation of just $66.5 million. They had traded above $2.30 in 2022.

It lost more than $130 million in a single day 12 months ago when Lake said the Kachi project, located in the remote Catamarca province, would be delayed by six years and cost significantly more than expected.

Lake’s management previously said it aimed to produce 50,000 tonnes a year of lithium carbonate at Kachi by this year. It now estimates phase one will cost between $US1.1 billion and $US1.5 billion. In 2021, the company’s pre-feasibility study costs per 25,500tpa amounted to $US544 million.

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