Lithium

Lake Resources’ selloff is further evidence the lithium party is over

Mon 20 Jun 22, 6:13pm (AEST)
image

Stocks in article

lke
MktCap:
-

Commodities in article

Share article

Key Points

  • Lake Resources was down -13.69% to the close today
  • The lithium developer's share price is down -46% since early April 2022
  • Lake booked a -$4.71m loss before income tax expense in the six months to December 31

Lake Resources’ (ASX: LKE) first day as an S&P/ASX 200 company turned out to be bad omen, with the lithium developer’s share price down -13.69% to the close today. Despite the company’s fairly chipper announcement, the stock appears to have been caught up in the tough love being dished out to most players in the listed lithium space and across the broader metals market.

While lithium rivals Core Lithium (ASX: CXO) and Sayona Mining (ASX: SYA) were also on the receiving end of negative market sentiment, down -6.9% and -7.14% respectively, the S&P/ASX 300 Metals and Mining Industry (ASX: XMM) also slipped -5.85% today.

What goes up

While Lake still remains inside the top 200 (now ranked 192) with reduced market cap of $1.8bn, any further losses could see it back outside this coveted cohort next time the index rebalances.

On a tear over the last year, the lithium developer’s share price is up 344% on a 12 month looksee. However, recent share price performance, down -46% since early April 2022 is further evidence that the lithium party is lower.

What Lake told the market today

Ironically, if Lake’s announcement today - that Stu Crow will serve as the company's executive chairman for six month to assist in its transition to serve North American and Asian supply chains - had been released two months ago, the share price may have gone up by as much as it fell today.

As part of this transition to North America managing director Steve Promnitz plans to leave after establishing Lake’s dominant position in Argentina.

This footnote has clearly troubled some investors given the role Promnitz has played getting the operation to where it is now.

Where to from here

Lake also reminded the market of its aspirational target is to reach capacity of 100,000 tpa by 2030. This underpin Lake’s ambition to become a leading global producer of sustainable high purity lithium.

To the uninitiated, Lake is now developing four lithium brine projects in Argentina and has more than 150 people working across all four lithium brine projects.

The company has one of the largest lithium lease holdings in Argentina amounting to more than 2,200skm with most leases owned 100%. Lilac Solutions has the right to earn up to 25% of the Kachi project upon achieving certain milestones.

image

Lake Resources share price over 12 months.

What brokers think

Lake booked a -$4.71m loss before income tax expense in the six months to December 31, due to a $990,000 increase in corporate expenses and foreign exchange losses of -$980,804.

Consensus on Lake is Strong Buy.

Based on Morningstar’s fair value of $2.51 the stock appears to be undervalued.

Bell Potter liked Lake’s 50ktpa lithium carbonate Kachi Lithium Brine Project in Argentina and had a speculative buy rating.

The broker’s target price of $2.83 suggests 90% upside of the current price.

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

Get the latest news and media direct to your inbox

Sign up FREE