Lake Resources NL (ASX:LKE, OTCQB:LLKKF) hit a new share price record on signing a non-binding Memorandum of Understanding (MoU) with Japan-based trading company Hanwa Co Ltd to negotiate the offtake of up to 25,000 tonnes of lithium carbonate per annum over 10 years at market prices.
The MoU also allows Hanwa to consider providing financial support mechanisms such as a meaningful equity investment, a potential prepayment on offtake and trade finance facilities in order to secure a long-term agreement and build up a sustainable partnership with Lake.
This deal has the potential to open the Asian market for LKE, as Hanwa offers not only marketing and distribution services, but also aids in coordinating a strategic and sustainable supply chain with potential customers in the battery industry.
Shares were as much as 17.86% higher intraday to A$1.98, a new record high, with more than 39 million changing hands while the company's market cap is approximately A$2.25 billion.
Advancing battery technology development
“In April 2021, Hanwa formed the Battery Team to create multifaceted business opportunities in the industries of electric vehicle (EV) batteries and accumulators,” Hanwa corporate officer and battery team supervisor J Tomono said.
“The market for lithium-ion batteries for EV is unstoppably expanding and we are handling raw materials for those sophisticated products and increasing our involvement in all aspects of the supply chain.
“We have been seeking the right products, at scale, with the right partner, to advance development of the latest technology in batteries and its cathodes.”
The two companies have agreed to negotiate in good faith, using all reasonable endeavours, to formalise a comprehensive legally binding document to develop a ‘clean lithium’ supply chain focused on meeting the environmental demands of electric vehicle (EV) manufacturers and their customers.
Hanwa will coordinate strategic partnerships between the two companies and downstream partners or customers, while Lake will provide samples and technical support, and exposure to its existing and potential partners.
Leading environmental credentials
“The MoU reflects that Hanwa intends to move quickly to progress finalisation of the terms on a strong, long-term, binding final agreement on offtake, as well as allow for financial support for Lake,” Lake Resources managing director Steve Promnitz said.
“Both Lake and Hanwa see this MoU as the path to finalisation of a binding long-term agreement with the ability to scale up production and participate in Lake’s other projects to ensure high-quality lithium products with leading ESG benefits are available to Hanwa’s EV and battery customers.”
Lake Resources’ chair Stu Crow said the finalisation of a binding long-term agreement with Hanwa would bolster Lake’s financial position as it moved towards a Final Investment Decision later in the year.
“This MoU and finalisation of a binding offtake agreement with Hanwa will allow Lake to stay an independent supplier into global lithium supply chains and ensure security of supply to the market and potential customers.
“Increasing customer and consumer scrutiny around the environmental credentials of lithium production; and concerns about security of supply has given us the confidence to enter into this partnership with Hanwa,” Crow said.
Lake has already received indications from the UK and Canada Export Credit Agencies that they are willing to offer debt finance covering about 70% of the Kachi project’s capital requirements.
Crow says the MoU represented further support for Lake’s goals – dubbed the TARGET 100 Program – of reaching 100,000 tonnes of high purity lithium production per annum by 2030.
The MoU and finalisation of a binding long-term agreement with Hanwa will also provide access to project-scale batteries to complement a solar farm energy source at the Kachi project, as well as trade finance at favourable rates for installation.
About Lake Resources
Lake Resources is a clean lithium developer using direct extraction technology for the production of sustainable, high purity lithium from its flagship Kachi Project within the Lithium Triangle in Argentina, among other projects covering 220,000 hectares.
LKE’s Kachi Project covers 705 square kilometres with an expandable resource of 4.4 million tonnes of lithium carbonate equivalent of which only 20% is used for 25 years of production at 25,500 tonnes per annum.
The direct extraction method used by the company delivers a solution for two rising demands of electric vehicle batteries – high purity battery materials to avoid performance issues, and more sustainable, responsibly sourced materials.