Lake Resources direct extraction technology for Kachi Lithium Project offers sustainable supply chain for EVs

Lake Resources NL (ASX:LKE) recently completed the pre-feasibility study (PFS) into the technical and economic viability of the Kachi Lithium Brine Project in Catamarca, Argentina, demonstrating that it can produce high-quality lithium that is low in impurities. Engineering and costing of process design options were supported by lithium extraction test work by Lilac Solutions, targeting production of 25,500 tonnes per annum of battery-grade lithium carbonate through the treatment of brine with direct lithium extraction technology based on ion exchange. "Game-changer" Lake Resources managing director Steve Promnitz said: “This is an innovative method because it extracts lithium directly from the salty water from the brine. “It’s truly a game-changer in the industry, it's more efficient, it's faster and it has double the recoveries of 80-90% versus 40-50% for the industry-wide evaporation process.” “It's competitive with brine producers, but best of all it produces a product which is not subject to the vagaries about product quality. “It can very quickly and efficiently produce a premium product in days - not in months or years.” Lilac’s ion-exchange beads hook onto all the lithium in the water, then the eluate from the process is further concentrated, purified and fed into a conventional lithium carbonate plant to produce lithium carbonate. The brine is then returned to the aquifer without changing its chemistry. Pilot plant production During the March quarter, the company commenced a pilot plant operation in California to produce samples for potential offtake partners. Towards the end of the year, Lake intends to construct a pilot plant on-site at Kachi which could potentially be used at its other projects in the lithium triangle. Promnitz said: “Because of the interest in offtake we're going to be running the pilot module in California a little bit longer to produce enough samples to satisfy that initial demand, prior to then completing the pilot plant modules and sending those to Argentina and keeping one operating in California.” A 99.9% lithium carbonate product with low impurities (battery grade) can be produced by the Lilac process within several hours of extraction. Robust operating margin Lake's PFS showed post-tax NPV of US$750 million (nearly A$1.2 billion), an IRR of around 25% and an EBITDA of US$155 million (A$245 million) in the first full year of production. The project has an operating margin of 62%, using a forecast of US$11,000/tonne lithium carbonate. Promnitz said: “This generates a better than 60% operating margin or almost A$250 million in its first full year of operation. “Most of the other projects that were released last calendar year in DFS and PFS from Argentina use numbers that were $1,000 to $2,500 per tonne tonne higher. “We're fairly confident that it is quite conservative and actually provides plenty of upside for the company going forward.” Reducing operating costs A competitive capital cost (capex) estimate of US$544 million was estimated, including contingency, and operating cost (opex) of US$4178/tonne lithium carbonate. Promnitz said opportunities to increase that going forward would be explored in the DFS, which could potentially include a staged start at 10,000 tonnes per annum. He said: “We have been looking at solar power and how best to use that to lower energy costs, adjusting reagent use and moving from batch processing to continuous processing. “There's also an opportunity to extend the resource. “We could easily do some more drilling, prepare some more wells to expand the project life.” The company expects the DFS to be finished by the middle of 2021. All of Lake's projects are within the lithium triangle, in Argentina, Bolivia and Chile. Looking forward In the near-term, the company is focused on producing samples for off-takers and engaging in more detailed discussions and will investigate a potential resource development later in the year. Discussions are continuing for debt funding of US$10 to US$25 million for the DFS, which would support permitting and lithium preproduction for the Kachi Project for the next two years with full financing through to construction. Promnitz said: “We were very fortunate and happy with the equity capital raise, and we're just looking at getting a structured debt facility in place with equity kicker to fund the next two years. First production for the Kachi project is targeted for 2023. Sustainable supply chain demand Lake is confident that the growing demand for electric vehicles will continue, with many forecasters seeing lithium undersupply in around 2023-2025. The direct extraction process is also attracting interest from electric vehicle makers and battery makers keen to demonstrate they have access to a sustainable scalable supply chain for raw materials. Promnitz said: “This is going to be the first major project with a truly sustainable lithium product using a new direct extraction technology and producing a premium product. “Despite COVID-19 being an awful thing that's affected the world, at least it's sort of refocused the world to looking at the benefits of perhaps a cleaner and more battery-driven electric mobile future.”