‘Strong and competitive economics’: Lake’s DFS for Kachi leads the charge to bring lithium to market in Argentina

Special Report: Lake’s Phase 1 Definitive Feasibility Study (DFS) for the Kachi lithium brine project in Argentina paints a picture of a Tier One project, backed by a significant resource, that will bring much-needed lithium into the expanding EV and energy storage markets.

Lake Resources (ASX:LKE) has released the figures of its Phase One feasibility study at Kachi, marking the next important milestone in the development of the project.

Home to a 10.6Mt LCE resource, LKE is targeting production of consistent battery grade lithium carbonate (>99.5% purity) on site at Kachi, without the need for further refining or processing.

LKE has taken an innovative approach to lithium brine extraction through the application of ion exchange Direct Lithium Extraction (DLE) to produce higher quality and more environmentally friendly lithium. This is being rolled out in partnership with Lilac Solutions.

With a post-tax net present value (NPV) of US$2.3b and an internal rate of return (IRR) of 21%, the Kachi project is targeting battery-grade lithium carbonate revenue of US$21b and US$16b EBITDA for the 25-year life of mine (LOM).

Phase One aims to produce 25,000tpa over the LOM, with an initial capex of US$1.38b and US$6.05/kg of lithium carbonate equivalent estimated run rate, both within the range provided in the previous operational update.

Kachi is targeting first lithium in 2027 with ramp-up to full capacity by the end of 2028, which is forecast to coincide with the start of a prolonged period of structural deficit for battery-grade lithium chemicals.

Lithium demand growth to continue as Kachi comes online

“These are very strong and competitive economics,” LKE CEO David Dickson says.

“Demand growth is expected to continue with strong forecasts for the next two decades – at the time our top tier project comes into production.

“Kachi will be producing a high-quality, high-specification battery grade product to match this increasing demand.”

Currently, lithium demand is on pace to grow from less than 1Mt LCE in 2023 to over 4Mt LCE in 2040, a 9% compound annual growth rate (CAGR).

Maiden ore reserve

A maiden contained ore reserve of 624,000t LCE has also been defined, demonstrating that the mine plan is capable of delivering sufficient lithium brine to the plant for a planned 25,000tpa LOM operation.

The mine plan includes 16 production wells and 21 injection wells, with average grades and flow rates that exceed production requirements.

LKE says the average feed grade to the plant for the first seven years of operations is 257 mg/L, averaging 245 mg/L in years 8-25 and reducing to 232 mg/L by year 25.

More than 85% of the 25-year LOM production is derived from measured resources, with the remainder predicted to be sourced from indicated resources.

“The ore reserve for the operation extracts just a small percentage of the mineral resource estimate,” LKE director of geology and hydrogeology Michael Gabora says.

“The modelling demonstrates that the feed grade will average above 245 mg/L with minimal dilution and that the operation can be developed in an environmentally responsible manner.

“Continued data collection and model updates will most likely result in further upgrades to the proved ore reserve, given the favourable conditions.”

Looking ahead

Next steps for LKE include the initiation of a strategic partner for Kachi to be led by Goldman Sachs, negotiations with potential offtake partners to secure binding agreements, and submission of the Environmental and Social Impact Assessment (EIA) in early 2024, in support of the Catamarca Province development permit application.

A final investment decision is targeted for Q1, 2025.

This article was developed in collaboration with Lake Resources, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.