Lake Resources scores an offtake and strategic investment with lithium merchant WMC energy

Thu 06 Oct 22, 10:44am (AEST)
Lithium Brine
Source: iStock

Key Points

  • Lake Resources enters into a Conditional Framework Agreement with WMC Energy for both offtake and equity
  • WMC provides commodity supply solutions including storage, finance and delivery of raw materials worldwide
  • The offtake of 25,000 tpa represents 50% of Kachi's forecasted output of 50,000 tpa

Lake Resources (ASX: LKE) has announced a conditional framework agreement with commodity merchant WMC Energy for both an offtake agreement and strategic equity investment. The company's stock rallied 7.5% to $1.08 as the market opened.

WMC is an independent physical commodity merchant that assists suppliers, processors and end-users in the nuclear fuel and lithium-ion battery supply chain with their raw material needs.

Two birds one stone

The conditional framework agreement seeks to de-risk two fundamental aspects for any emerging commodity producer: funding and offtake.

WMC will acquire a 10% stake in Lake Resources at $1.20 per share to "support the realisation of the Kachi Project. This represents an almost 20% premium to Lake's Monday closing price of $1.005.

"The agreement strengthens Lake’s long term shareholder base and adds to the equity component required for drawdown of debt facilities for project development," said Lake Resources in a statement.

The offtake agreement with WMC of up to 25,000 tonnes per annum of battery grade lithium represents 50% of Kachi's anticipated production of 50,000 tpa. The initial offtake is for ten years, with an option to extend the term for an additional five years.

The agreement is subject to a set of hurdles to be achieved by Lake Resources including the finalisation of its Definitive Feasibility Study, the performance of Lilac's demonstration plant and other due diligence.

Too many offtakes?

Lake Resources currently has two non-binding memorandum of understandings (MoU) in place with Ford and Japan's Hanwa. Both MoUs are seeking an offtake of approximately 25,000 tpa from the Kachi Project.

On one hand, the MoU's might be viewed as 'fluff' to pump the share price. On the other, Lake might have genuinely received a lot of interest for its clean lithium product.

Its also worth considering Lake has plans to fast-track the development of its assets to produce 100,000 tpa by 2030.

LKE chart
Lake Resources share price chart


Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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