Will Lake Resources become profitable in 2023?

Last year was a rollercoaster for the share price of lithium favourite Lake Resources NL (ASX: LKE).

It tumbled 21% over the 12 months ended 31 December amid short seller attacks, ownership disputes, and the market’s apparent distaste for unprofitable outfits.

But could 2023 be the year the S&P/ASX 200 Index (ASX: XJO) lithium developer posts a profit? Let’s take a look.

Right now, the Lake Resources share price is trading at 82 cents.

Let’s dive into the lithium developer‘s business

Lake Resources is currently working on its flagship Kachi Project’s definitive feasibility study (DFS).

The Argentina-based project’s DFS will be based on 50,000 tonnes per annum of lithium carbonate equivalent (LCE) production.

The company plans to use direct extraction technology by technology partner Lilac Solutions to produce lithium at the project.

It was recently revealed that the project’s demonstration plant – operated by Lilac – has successfully run for 1,000 hours. It produced 40,000 litres of lithium chloride elute in that time, which was sent to be turned into lithium carbonate.

Additionally, the company provided an update on Kachi’s lithium resources last week. Its measured and indicated resource was doubled to 2.2 million tonnes of LCE.

Unfortunately, despite all the good news, Lake Resources likely won’t post a profit in 2023.

Lake Resources‘ maiden profit unlikely in 2023

There’s one key ingredient resource shares generally need to turn a profit: Saleable product.

As we have explored, Lake Resources isn’t quite there yet. And it probably won’t reach the milestone for some time to come.

The ASX 200 company previously slated Kachi’s construction to begin this year, with production of 25,500 tonnes per annum tipped for 2024.

From then, it’s expected to bring in US$260 million of earnings before interest, tax, depreciation, and amortisation (EBITDA) each year.

Fortunately, while Lake Resources probably won’t be operating in the green this year, the company is in good financial shape. It had $158.8 million of cash and no debt at the end of September.  

That, along with low-cost project finance from the UK Export Finance and Export Development Canada, should fund it through to production.

The post Will Lake Resources become profitable in 2023? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper 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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