Lake Resources share price jumps on lithium offtake and investment news

The Lake Resources N.L. (ASX: LKE) share price is having a strong day.

In morning trade, the lithium developer’s shares are up 6% to $1.05.

Why is the Lake Resources share price charging higher?

Investors have been bidding the Lake Resources share price higher on Wednesday after the release of a positive announcement.

According to the release, the company has signed a conditional framework agreement (CFA) with lithium battery producer SK On for the offtake of up to 25,000 tonnes per annum (tpa) of lithium from the Kachi Project in Argentina.

This represents 50% of its planned production and will run initially for five years with an option of extending for a further five years.

The offtake will be priced on an agreed market price formula based upon the average quoted price in the quotation period.

In addition, SK On has agreed to acquire a 10% stake in Lake Resources via the issue of new ordinary shares. These shares will be issued at the 20 trading-day volume weighed average price prior to today.

As you would have noticed above, the agreement is conditional and will depend on the outcome of a number of conditions. This includes its definitive feasibility study, the Lilac demonstration plant results, financial due diligence, and product specifications.

Management commentary

Lake Resources’ executive chairman, Stu Crow, commented:

The CFA delivers a long-term strategic agreement with SK On, one of the world’s pre-eminent lithium-ion battery producers with a major growing presence in the North American market.

Crow also notes that it strengthens the company’s long term shareholder base and adds to the equity component required for the drawdown of debt facilities for project development.

SK On’s vice president, Jinsuk Ryu, added:

SK On is very pleased to execute this CFA with Lake, a clean lithium developer, which can allow SK On to secure a stable lithium supplier for its U.S. supply chain. Lake fits particularly well with SK On’s ESG policy as it utilises environment-friendly direct lithium extraction technology for production of lithium. With this CFA, both Parties will strengthen mutual partnership to advance opportunities to secure sustainable sources of raw materials in the future.

The post Lake Resources share price jumps on lithium offtake and investment news appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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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