Lake Resources delays lithium carbonate output to 2027, hikes costs (updated)

Lake Resources NL

19/06/2023 04:23

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      First stage at 25,000 metric tons in 2027
    

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      Lake targets 50,000 metric tons a year by 2030
    

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      Cost blows out to $1.1 billion-$1.5 billion
    

  
 (Adds detail, CEO comments)
    By Melanie Burton
       June 19 (Reuters) - Australian lithium developer Lake
Resources  LKE.AX  on Monday announced a three-year delay to
first production from its Kachi project in Argentina and more
than doubled its cost estimate, which sent the company's shares
tumbling 23%.   
    The delay comes just as demand for lithium chemicals is
expected to drive the industry's sales to more than $10 billion
a year within the next decade, given rapidly expanding
production of batteries for electric vehicles.
    Lake's initial plan had been for first production in 2024 at
a capital expenditure cost of $544 million, as outlined in 2020
report. 
    But in an investor update on Monday following a revamp of
the project, the developer pushed back expected first production
of 25,000 metric tons of lithium carbonate to 2027 and hiked
spending estimates to $1.1 billion to $1.5 billion.
    The plans include a phased expansion to 50,000 metric tons a
year by 2030, Lake CEO David Dickson said.
    Dickson, who became CEO last September bringing a background
of 30 years in oil and gas project development, told Reuters
that Lake Resources had significantly de-risked the project,
grown its lithium resources and now had a realistic timeline.
    "This is not a mining project. We are building a specialty
chemical process plant," he told Reuters. 
    Shares in Lake were down 15% at A$0.4025 at midday after
hitting a low of A$0.385. 
    Soaring inflation, supply chain lags and a lack of skilled
labour have forced a swathe of blow outs for lithium developers.
    The delay at Kachi is partly because it has yet to finalise
a power supply deal with the local government. It is too early
to say what percentage of grid power would be sourced from
fossil fuels and renewable energy, Dickson said.
    The Kachi project is a test bed for direct lithium
extraction, a new technical process that uses much less water
but has yet to be fully commercialised. 
    Lake is targeting 70% funding from export credit agencies
and a contribution from its technology provider, Bill
Gates-backed Lilac Solutions. It will also consider offering
equity and obtaining financing from its customers, Dickson told
an investor briefing.
    Its customers are South Korea's SK Innovation  096770.KS 
battery unit SK On and battery materials trading house WMC
Energy, which owns a 10% stake in the developer.
    Lake said it had delayed completing a key study that is
often a catalyst for investment to December from mid-year.
        
  
        
  
($1 = $1.0000)

 (Reporting by Harish Sridharan in Bengaluru; Editing by Kim
Coghill and Sonali Paul)
 ((Harish.Sridharan@thomsonreuters.com; Twitter: https://twitter.com/damnit_saladin))