Why is the Lake Resources sliding 7% into the red on Friday?

Lake Resources adds to the list of ASX metals & mining players booking losses today.

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Key points

  • Shares in Lake Resources have gone underground today, down more than 7%
  • Broad sector weakness alongside softening underlying markets appear to be weighing in, despite a healthy last quarter for the company
  • In the last 12 months, the Lake Resources share price has soared more than 505%

Shares of Lake Resources NL (ASX: LKE) are struggling today and look set to finish deep in the red. At the time of writing, investors are paying $1.64 per share for Lake Resources, a 7.37% drop on the day.

Despite no market-sensitive updates from the miner, ASX resources shares have turned sharply in recent weeks, with losses extending well into today’s session.

In the past month of trade, the Lake Resources share price has plunged more than 27% into the red, clipping a 15% loss in the previous week alone.

What’s driving the Lake Resources share price lower?

Investors were originally positive about Lake Resources after the release of its quarterly activities and cash flow report on 21 April.

In its release, Lake highlighted numerous growth updates it had achieved throughout the quarter, although these weren’t exactly news.

Perhaps one key takeout was the company’s signing of new offtake agreements with Ford Motor Company and Japan-based Hanwa.

However, investor sentiment was already turning sour, with the Lake Resources share price sliding from a high of $2.29 per share on 19 April directly to today’s levels.

Broader sector weakness

Also sliding hard from that date was the major indices covering Aussie metals, mining and materials companies.

The S&P/ASX 300 Metals & Mining Index (ASX: XMM) has fallen 12% since that date alongside the S&P/ASX 200 Materials Index (ASX: XMJ) with an 11% drop.

The downside in both sectors has been attributed to a number of factors, ranging from profit-taking, the US Federal Reserve’s decision to hike interest rates, and global commodity exchange-traded funds (ETFs) realising outflows in April.

Not helping the picture is the price of lithium, with lithium carbonate finally realising a peak and levelling off before showing its first downward move in more than 12 months.

It now trades 7% off its highs achieved in late March 2022.

With broad weakness in the sector and a softening underlying market, several names like Lake Resources have seen their share price take a U-turn lately.

In the last 12 months, the Lake Resources share price has soared more than 505% and is still up 62% this year to date.

Motley Fool contributor Zach Bristow 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 Scott Phillips.

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