Lake Resources Limited (ASX:LKE) Managing Director and CEO David Dickson discusses how he ended up at Lake, the company's focus over the last half, building a new team, Lake's technology partner Lilac Solutions, offtake agreements, credit export agencies and operational updates.
Tim McGowen: We're talking today with Lake Resources (ASX:LKE). If you don't know, the company, ASX code "LKE". It's got a market cap of around $900m. The company's a clean lithium developer utilising clean direct extraction technology for the development of sustainable high-purity lithium from its flagship Kachi project, as well as three other lithium brine projects in Argentina. We're joined today by David Dickson, who is the company Managing Director and CEO. David, welcome to Sydney.
David Dickson: Thanks, Tim. Always good to be back.
Tim McGowen: Now, you're an oil and gas man, and you've found yourself in the lithium business. How is that applicable?
David Dickson: Yeah. So, firstly, how did I end up here? And there's a number of reasons for it. But when I looked at the project and the business, I saw it more as an oil and gas type development than a mining project. And, in fact, quite often now in my speeches I talk about this is where mining meets oil and gas. So, when I looked at it, I thought, "Hey, I've got a lot of… You know, I've got 30-something years' experience in oil and gas, building large capital projects. This is very similar. We're going to drill some wells. We're going to bring a fluid to the surface. We're going to put it through essentially a petrochemical facility, going to extract the lithium. And then what we're left over with, the spent brine, we're going to reinject it back into the ground." So, very, very similar to oil and gas, the upside of it being we're not dealing with hydrocarbons. So, from a safety aspect, a lot easier to work with. So, when I saw this opportunity I thought, "Hey, I can do this. I know how to get this done." And then, lastly, the other thing attractive to me was, you know, spending many hours with the chairman at that time, Stu Crow, who, you know, I just admired his vision and what it was he was trying to do. And he persuaded me that this was the next opportunity for me, so, yeah, really happy to be here.
Tim McGowen: And Lake shareholders would argue that the company's been a little bit quiet of late. What's been your focus over the last six months or so?
David Dickson: Yeah, I mean, first up, I'll recognise, yeah, we have been a little bit quiet. And I understand the need for information and flow. And what I'd say to shareholders, we haven't been doing nothing. In fact, we've being doing quite a lot of things, and all the way from we built a new board of directors, so that's all about bringing more governance into the company. Because at Lake it's all about… We're at the stage from exploration evaluation to a development company. So, it's a bit like growing up, right? So, now we're moving into that kind of middle stage of life. And so, by building a stronger board, bringing in stronger governance to the company, I was then able to focus my time on building a new executive team, but also bringing in a lot of technical resources. You know, we've got a large capital project we need to build here. We're going to move a lot of fluid. So, that means we've got to bring in people from drilling, hydrogeology, to process engineers, to construction people. And so what I've been focusing on is bringing that team in and working with me to evaluate particularly the Kachi project, which is obviously the flagship project for the company.
Tim McGowen: And there have been some questions around your technology partner, Lilac. Can you clarify some of those issues?
David Dickson: Just as I was entering into the company, the first thing I dealt with, which was announced just a few days before I took over, was the company was heading for a dispute with Lilac. So, very quickly I went to work to look at how we can get this relationship, you know, back online. And one was blaming the other. And at the end of the day, I think I was able to bring a little bit of reality to the situation. And now we're making a lot of good progress, right? You know, we've clearly announced the first two milestones for Lilac at the end of 2022. And that was the first 40,000 tonnes of lithium chloride and the facility operating for 1,000 hours. And now we're into the next steps, which is producing the next batch of 80,000 litres. And we're very well progressed through that. And I believe we'll be finished that round about April, May time. But now the next test is getting results from our test samples. So, from the first 40,000 litres, we sent that to Canada to a company called Saltworks, is being converted into lithium carbonate. And we've sent two test samples to two independent test houses. And hopefully we'll see some good results in the next month or so.
Tim McGowen: And Lilac, of course, are an equity partner. What's the outlook for that?
David Dickson: Yeah, I mean, end of the day they've got an opportunity to aim up to 25 per cent equity ownership of the Kachi project. And I always like to highlight Kachi project, not Lake Resources. And that's built on a number of things. So, the last two elements is producing the balance of 80,000 litres, but also based on the test results and the purity of the lithium that we achieve from this carbonate process.
Tim McGowen: And can you talk to the credit quality of the offtakers? A lot of shareholders probably ignore the importance of the credit quality of the offtake to help credit wrap the project.
David Dickson: Yeah. I mean, if you look at the CFAs (conditional framework agreements), when you look at the two offtake companies… So, firstly, SK On out of Korea is, if not the largest, one of the largest battery manufacturers in the world. So, very, very strong. Building a number of gigafactories around many continents. So, very, very strong company. And then the other balance of the offtake, we are working with a company called WMC Energy, which is based out of Europe, who are more a trading house. But their customers are companies like Northvolt and BMW and Porsche, a lot of the European car dealers. So, happy with both offtakers. And we have a good relationship with both.
Tim McGowen: And, of course, debt will be a part of the equation, I assume. The export credit agencies, are those conversations still continuing?
David Dickson: Yeah, yeah. So, one of the things I went to work very quickly was to make sure our lenders were going to be with us through this whole process. So, I've met the potential ECA (export credit agency). And I say "potential" because, as we go further through this process, maybe there might be more interest of other people coming in. But today we're focused… we're working with two ECAs, so UKEF which is the UK Export Finance and EDC, which is the Export Finance out of Canada. Relationship is good. We keep them up to speed of what's happening with the project, timing, looking at capital costs, etc. And they're very, very important to this process. You know, they provide a lot of the cover for a lot of the risk that allows our other bankers, which is Citi and JP Morgan, to come in and support that lending into the project. But, at this stage, our relationship is very good.
Tim McGowen: David, the operational update, is that probably the next thing to be released to the market?
David Dickson: Yeah. So, my biggest priority now is to focus on what does this project look like. So, the company last year announced, "Hey, we're going to go from 25,000 tonnes to 50,000 tonnes per annum," which is a lot of lithium. And so we've got to evaluate how you actually build a project that size. This is a large capital project and not to dissimilar, as I said, to oil and gas. So, what I'm focusing my attention on now is what is a concept of how we get from 0 to 50,000 tonnes. How do we get there? And how do we do that from concept, what is the capital cost, and how long is it going to take? At the same time, evaluating the risk, and that's looking at operational risk, technical risk, maintenance risk further down the line. So, the team that I brought in, we spend a lot of time evaluating that. And what we're looking to do is come to the market sometime in the second quarter to provide an operational update, because that will then form the basis of the DFS (definitive feasibility study), which we delayed by six months to the middle of this year. But, yeah, we're working through that. And I believe I've got the right team of people now looking at this.
Tim McGowen: David, thanks for your time.
David Dickson: Thank you.
Ends
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