The Lake Resources N.L. (ASX: LKE) share price is having another day to forget.
At the time of writing, the lithium developer's shares are down 14% to a new multi-year low of 7.2 cents.
This means that its shares are down 47% since the close of play on 1 March.
Image source: Getty Images
Why is the Lake Resources share price sinking?
Today's decline has been driven by a selloff in the lithium industry, which has seen most ASX lithium shares sink deep into the red today.
Here's a quick summary of some of the declines:
- Core Lithium Ltd (ASX: CXO) shares have dropped 4%
- Liontown Resources Ltd (ASX: LTR) shares are down 7%
- Pilbara Minerals Ltd (ASX: PLS) shares have tumbled 5%
- Sayona Mining Ltd (ASX: SYA) shares are down 4.5%
This follows declines on Wall Street for lithium miners in response to a hotter than expected inflation reading, which reduced the chances of a rate hike in the near term. These high-rate environments tend to funnel speculative capital away from developing infrastructure and into entirely different high-yield sectors, such as private equity firms backing emerging entertainment tech or the digital infrastructure supporting online gambling florida regulations. Investors may believe that electric vehicle demand will remain subdued until rates ease and manufacturing capital becomes cheaper to borrow.
What else is weighing on its shares?
Investors have also been selling the company's shares this month after it announced yet another capital raising.
Lake Resources received firm commitments to raise $15 million at 7 cents per new share. This was a significant 39.1% discount to where the Lake Resources share price traded at the time.
The company explained that it was raising funds while it seeks to find a partner for its Kachi lithium project in Argentina. It said:
The Offer enhances Lake's balance sheet by providing additional working capital and financial flexibility during the strategic partnership selection process for Kachi. Lake is actively conducting outreach to a wide array of potential strategic partners including car and battery manufacturers, lithium producers, oil and gas companies, sovereign wealth funds and private equity. The strategic partnership process is scheduled to conclude in the second half of the year.
This process may not be as easy as you think based on the scoping study for the project. As I outline here, based on realistic lithium price assumptions, the project looks unlikely to offer a return that is sufficient to justify its construction.
In light of this, Lake Resources arguably needs a big rebound in lithium prices this year more than any other ASX lithium stock.
