Lake Resources to Slash Jobs and Sell Assets Amid Falling Lithium Prices

Highlights:

• Workforce Reduction and Asset Sales: Lake Resources plans to cut its workforce from 180 to 20 employees and sell non-core projects to focus on its flagship Kachi development.
• Seeking Development Partner: The company is actively searching for a major investor or offtake partner for the AU$2 billion Kachi project, with efforts likely extending into 2025.
• Lithium Market Challenges: Lithium prices have dropped over 80% in the past year, with analysts predicting continued pressure until at least 2028 due to oversupply concerns.

Lake Resources Faces Tough Decisions

Lake Resources Limited (ASX: LKE), a mining company focused on Argentina's lithium triangle, announced plans to reduce its workforce and sell non-core assets due to declining commodity prices and the need for a development partner. The company’s CEO, David Dickson, revealed these measures to investors on Monday, highlighting the focus on their flagship Kachi project.

Job Cuts and Asset Sales

Lake Resources plans to cut its workforce from around 180 employees to just 20. The company is also looking to sell its other projects in Argentina, including Paso de Jama, Olaroz, Cauchari, and Ancasti, to concentrate on the Kachi development. Dickson emphasized that these projects are not central to the company's operations.

Seeking a Partner for Kachi

The Kachi project requires a significant investment, estimated at AU$2 billion. Lake Resources enlisted Goldman Sachs in November to find a major investor or offtake partner. Despite initial efforts, Dickson expects the search for an equity or offtake partner to continue into 2025, noting that higher lithium prices are essential for the project’s progress.

Market Challenges

Lithium prices have plummeted over 80% in the past year, driven by concerns about oversupply. Analysts at Wood Mackenzie and UBS predict that lithium prices will remain under pressure until at least 2028. Citi recently recommended shorting lithium after a notable drop in Chinese carbonate futures.

Industry Outlook

Despite current market conditions, Lake Resources predicts a structural deficit in battery-grade lithium within the next five years. Dickson remains optimistic, citing industry analysts' forecasts and the company’s strategic actions to secure financial flexibility. The company continues to receive support from California-based Lilac Solutions, which has invested AU$50 million in Kachi.

Lake Resources' shares remained steady at 4¢ on Monday, reflecting a significant decline from their peak in 2022. The company’s market capitalization now stands at AU$66.5 million, down from over AU$2.30 per share in the previous year.

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