Why is the Lake Resources (LKE) share price surging?

Posted: 11 April 2022 12:35 pm
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Ahead of today's jump, shares in the lithium explorer jumped 55% in the last month.

Lake Resources (ASX: LKE) is topping the list of most traded shares on the ASX on Monday. Shares in the lithium explorer were already up 12.4% to $2.09 at the time of writing, building on the momentum that has boosted the company's market value more than 6-fold over the past 12 months.

Why has the LKE stock price zoomed?

The latest jump in the Lake Resources stock comes on the back of the junior explorer signing a major new off take agreement with global car giant Ford Motor Company (NYSE: F).

Under the non-binding memorandum of understanding (MoU) signed between the 2 firms, Ford will buy about 25,000 tonnes of lithium a year from Lake's flagship Kachi Project in Argentina, which sits in the middle of South America's so-called "lithium triangle" hub.

The deal will help the US car giant with its determined push into the EV segment as it looks to take a portion of a market so far dominated by Tesla Inc. (NASDAQ: TSLA).

"Both Lake and Ford see this as an opportunity for a potential long-term agreement with the ability to scale up environmentally responsible production and participate in Lake's other projects to ensure high-quality lithium products are available to Ford," Lake's Managing Director Steve Promnitz said in a statement to the ASX.

"This MoU with Ford supports Lake's strategy to be a key independent supplier into global lithium supply chains and ensure the security of supply to customers."

Key supplier

The latest announcement comes just weeks after a similar agreement last month when Lake signed an MoU with Japan's Hanwa Co Ltd to supply up to 25,000 tonnes per annum of lithium carbonate from the Kachi Project.

The 2 deals underline Lake Resources' growing status as a supplier to the global EV supply chain which in turn further de-risks the Kachi project and 3 other under-development projects in Argentina for financiers and investors. Under its TARGET 100 program, Lake has set a goal of producing 100,000 tonnes a year of high purity lithium chemical by 2030.

It has indeed cheered up Lake's investors, with the company's market value having jumped more than 55% in the past month alone.

The recent climb also comes on the back of a lift in ASX-listed lithium stocks due to growing expectations for a continued rise in global prices, amid a looming supply deficit for the electric vehicle battery-making material.

On Monday, shares in rival ASX-listed explorers Core Lithium (ASX: CXO) and Pilbara Minerals (ASX: PLS) were up nearly 4% and 2% respectively. As experts warn that supply is not keeping up with rapidly increasing demand for electric vehicles.

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