Lake Resources N.L.

LKE Details

Appointment of Joint Financial Advisors: Lake Resources N.L. (ASX: LKE) is engaged in the exploration and development of lithium brine projects. The market capitalisation of the company as on 03 March 2021 stood at ~$395.48 million. As per a recent update, the company has appointed joint financial advisors- SD Capital Advisory Limited and GKB Ventures Limited to structure and secure project finance for the construction and development of the Kachi Lithium Project. LKE is looking to access international debt finance via Export Credit Agencies, and secure lower cost for long term capital.

31 December 2020 Quarter Ending Update: During the quarter, the company has commenced the Definitive Feasibility Study (DFS) at the Kachi Project. It produced battery quality lithium carbonate with a high purity of 99.97% through direct extraction from the Kachi brines. These are further being processed into lithium-ion battery test cells by Novonix. The company has raised $20 million during the period. It reported a cash outflow of $668,000 during the quarter.

Cash Flow Used in Operations (Source: Company Reports)

Outlook: The company expects that there will be an increase in the need for clean solution, with the growth in electric mobility, which needs cleaner and better batteries. It anticipates lithium demand to grow 20% year on year through to 2030. The main objective of the company is to produce clean battery quality lithium carbonate at scale for use in the accelerating battery and electric vehicle (EV) market.

Stock Recommendation: As per the recent announcement, the company has confirmed positive results from the initial testing by Novonix for the production of NMC622-based lithium-ion battery test cells using samples of LKE’s 99.97% purity lithium carbonate. The company reported a decrease in the cash position to $55,511 in FY20 from $1.72 million in FY19. As per ASX, the stock of LKE is trading above its average 52-weeks’ levels of $0.022-$0.475. The stock of LKE gave a positive return of ~1,087.5% in the past six months and a positive return of ~369.13% in the past three months. On a technical analysis front, the stock of LKE has a support level of ~$0.364 and a resistance level of ~$0.409. On a TTM basis, the stock of LKE is trading at a P/BV multiple of 24.1x, higher than the industry average (Basic Materials) of 11.3x. Considering the current trading level, valuation on TTM basis, steep price movements in the past few months, absence of revenue visibility and the key risks associated with the business, we are of the view that most of the positive factors have been discounted at current juncture. Hence, we suggest investors to wait for better entry-level and give an ‘Expensive’ rating on the stock at the current market price of $0.380, down by 6.173% as on 03 March 2021.

LKE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclosure: LAKE RESOURCES N.L. (Company) is a client of Kalkine Media Pty Ltd (Kalkine Media), an affiliate of Kalkine. However, under no circumstances have Kalkine or its related entities been, directly or indirectly influenced in making any related insights concerning Company as contained in this report, and no form of compensation is or will be received by Kalkine, Kalkine Media or Kalkine’s other related entities for the publication of this report.

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