What happened to Lake Resources’ share price?
Lake Resources NL (ASX:LKE) shares are up 51% at the time of writing, to 7.9 cents per share.
Why did Lake Resources shares push higher?
Lake Resources― one of the largest lithium tenement holders in Argentina ― announced ‘high fluid flows of conductive brines under pressure’ at Cauchari. The high fluid flows recorded density readings of 1.2 grams per cubic metre from 261 metres at depth. Slightly lower lithium values, to 480 mg/L, were also found from 186 metres below the ground.
These are extraordinary results for early stage drilling.
But it’s still early days…
The drilling pressures are high (we don’t know whether they will be sustained) and a more prolonged flow test is required. Still, if you didn’t know, Lake Resources holds its land in a prime location within the Lithium Triangle. That’s highly encouraging. It’s where half of the world’s lithium is produced.
It’s exciting times and no shock why the share price surged on the news.
What’s next for Lake Resources?
Today’s share price action looks good, with shareholders popping the Champagne bottles:
That said, despite a significant amount of success over the past year, Lake Resources’ share price has struggled to gain traction this year. That’s possibly because most of last year’s news has been priced into the share price and the market wants more. Fortunately, and much to everyone’s surprise, today’s announcement was a breath of fresh air for shareholders.
Mind you, things could get better…
Remember, with the rig now below 270 metres at depth, the current results are from around 261 metres. That’s good news. The drill hole is targeting 350-450 metres below the ground. That should keep shareholders on their toes, especially around the 450-metre mark. That’s where higher lithium values and fluid flows were found in the adjoining project:
Lake Resources’ drilling program is roughly 500 metres from the Ganfeng/Lithium Americas Cauchari project, where 23 million tonnes of lithium brine sits. The best news is that the company is targeting the same sands at roughly 450 metres below the ground. It stated in today’s announcement:
An additional new rig is being deployed to increase the depth capacity and speed of the drill rig currently at Cauchari. High fluid pressures, while encouraging, have meant that conditions are challenging. Results are expected to extend the proven resources in adjoining properties into LKE’s area. This will be followed by drilling extensions to the Olaroz area in LKE’s 100% owned Olaroz leases.
Shareholders can expect plenty of action over the coming weeks ― a discovery at depth could be big news for the share price. Lake Resources Managing Director Steve Promnitz summed up the announcement today:
High fluid flows of brines under pressure is exactly what any operator would want to see when drilling a lithium brine filled basin. Recent lithium results confirmed the potential for our Cauchari project to replicate the success of similar projects, and vindicate our long held view that the basin is fault-bounded and extends beneath thin alluvial cover. Further results will be released when available and progress to date with this rig continues to be very encouraging.
Indeed, while the share price has lingered over the past couple of months, today’s announcement could be the start of something bigger ― just what the doctor ordered. If you didn’t know, major corporate transactions continue in adjacent lithium leases.
The Lithium/Lithium Americas Cauchari project (discussed above) saw Ganfeng pay US$237 million for a 37% share previously held by SQM ― one of the world’s largest lithium players. The deal was followed by another US$160 million payment by Ganfeng, increasing its equity position to 50% on 1 April 2019.
Remember, while no guarantee of future results, Ganfeng’s Lithium/Lithium Americas Cauchari project is right next door to Lake Resources’ Cauchari project ― the one being drilled right now. And, again while no guarantee of future results, Ganfeng’s Lithium/Lithium Americas Cauchari project doubled its lithium resource to become the largest on the planet!
The bottom line: While shareholders shouldn’t get their hopes up yet (nothing is guaranteed in a sector that’s famous for riches to rags stories), Lake Resources is starting to look attractive on a risk-reward basis. We currently own zero stock in the company. However, if things progress as they are now, you may find it on our live trading blog later in the year.
Note: If you enjoy our analysis and want to become a more informed trader,sign up for all our content for FREE at the bottom of the article. Members rave about our comprehensive research on the live trading blog, which track our positions and profit and loss in real time for FREE. We also offer members an in-depth trading course and daily hot stock news, also for FREE.
To your first million,
The Trading For Millions Team
PS: We don’t own shares in the above company and aren’t paid by companies to write analysis on Trading For Millions ― it’s 100% independent. We also aren’t licensed to provide financial advice on the blog; we merely write it for enjoyment. You should consider your own financial position and conduct research on any company detailed on Trading For Millions.
Sign up for all our content and analysis for FREE below.