Lake Resources and earn-in partner Lilac Solutions resolve timeline dispute

Lake Resources (ASX: LKE) was up 4.3% at the open after the lithium developer announced that a contract amendment has been signed to resolve a longstanding dispute with earn-in partner Lilac Solutions.

Back in September the two companies fell out over the dates by which Lilac must achieve key milestones outlined in its flagship Lake’s Kachi Pilot Plant agreement signed a year earlier.

Lake Resources has advised that a contract amendment, agreed upon to resolve the dispute with Lilac Solutions, allows the teams to reset their relationship and jointly focus on the delivery of the Kachi project.

Recap

To the uninitiated, Lake’s Kachi Project is located in Argentina’s Catamarca Province at the southern end of the Lithium Triangle, a world-renowned province responsible for 40% of global lithium production.

Lilac, a lithium extraction technology company, was chosen as an earn-in partner based on its low-cost production process, offering higher lithium recovery rates, plus environmental and water source considerations.

Timelines amended – milestones remain

The amended contract agreement effectively means Lake and Lilac are no longer at odds over when timelines can be achieved. Originally, Lake expected the milestones set out for Lilac to be achieved by September 30, while Lilac maintained it has until 30 November to do so.

However, Lake will maintain its buy back rights if Lilac does not meet agreed testing criteria in a “timely manner”.

The original agreement stated that Lilac will earn up to a 25% stake in the Kachi project assuming certain milestones are reached by an agreed date.

From the outset, Lilac was expected to complete at least 1000 hours of operations (including uptime, maintenance, monitoring, and other work that constitutes operations), and produce a lithium carbonate feed totalling at least 2,500 kg of lithium carbonate equivalents from onsite operations.

Demonstration Plant

Meantime, both parties continue work at the Kachi demonstration plant, with performance in line with expectations.

The Demonstration Plant has now produced more than 15% of the total Demonstration Plant forecast output since the Plant came online this quarter.

Overall, 20,000 litres of Lithium chloride (LiCl) have been produced to date and ongoing production is proceeding, consistent with the Demonstration Plant’s planned operational schedule.

The Demonstration Plant, currently operating continuously at 90% of steady state capacity, volume, and production, continues to produce in-spec LiCl solution between 1900 and 3800 mg/L.

Previous testing on Kachi brines at Lilac’s California headquarters Oakland delivered 1400-2354mg/L.

Lilac Solutions is preparing samples for shipment to Saltworks and Lilac’s facility in Oakland CA for conversion into Lithium Carbonate.

What brokers think

The S&P/ASX300 company’s share price is up 22% over on year but has been trending lower since mid-August.

Consensus on Lake is Strong Buy.

Based on Morningstar’s fair value of $1.93 the stock appears to be undervalued.

Lake Resources share price over 12 months.