Lake Resources (ASX:LKE) share price charges 8% higher on major offtake deal

Lake has signed a major offtake deal…

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Key points

  • Lake Resources shares are on fire on Tuesday.
  • This morning the lithium developer announced a non-binding offtake deal with Japan's Hanwa Co.
  • This represents up to half of its planned production at the Kachi operation.

The Lake Resources N.L. (ASX: LKE) share price is charging higher on Tuesday.

In morning trade, the lithium developer’s shares are up 8% to $1.81.

Why is the Lake Resources share price charging higher?

The catalyst for the rise in the Lake Resources share price on Tuesday has been the announcement of a deal with Japan’s Hanwa Co.

According to the release, Lake has signed a non-binding memorandum of understanding (MoU) with Hanwa Co for offtake of 15,000 to 25,000 tonnes per annum (tpa) of lithium carbonate over 10 years from its Kachi Project in Argentina. The lithium carbonate will be priced at average quarterly benchmark market prices.

The top end of the agreement represents half of Kachi’s planned production of 50,000 tpa.

The release also notes that the MoU allows for Hanwa to consider providing financial support mechanisms. This includes 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.

Management commentary

Lake’s chairman, Stu Crow, commented: “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,” Mr. Crow added.

Lake intends to update the market on progress on the legally binding framework and other agreements as soon as it is able to do so.

Following today’s gain, the Lake Resources share price is now up over 500% since this time last year.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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