Lithium developer Lake Resources is laying off staff and selling assets as low prices for the electric vehicle battery metal hamper efforts to find customers and investors for its flagship Kachi project in Argentina, its CEO said.
The move is the latest blow to the lithium industry and its struggling producers after the more than 80% drop in prices for the ultralight metal in the past year, a fall fueled by Chinese oversupply and concerns the EV industry is not growing as fast as previously expected.
Australian-listed Lake is developing Kachi in Argentina’s mountainous Catamarca province with tech startup Lilac Solutions. The project attracted preliminary interest from and others, but operating at the remote site fueled extensive cost overruns that became untenable once lithium prices began to slide.
“Everything today is just drive by lithium prices,” Lake CEO David Dickson said on the sidelines of the Fastmarkets Lithium Supply and Battery Raw Materials Conference in Las Vegas this week. “The standard (lithium) price needs to be a lot higher for projects to move forward.”
Prices for lithium carbonate, a common type of the metal, are trading below $15,000 per metric ton, according to Fastmarkets data. Dickson said he believes many in the lithium market need to sign supply contracts with price floors of at least $15,000 to $20,000 per metric ton in order to make projects economic.
Lilac Solutions, which agreed in 2021 to invest $50 million in Kachi to showcase its version of direct lithium extraction technology, said it believes Kachi is a great lithium project and that its supply will be needed later this decade to meet rising global demand.
“We support Lake Resources and their great team, and we look forward to getting into production,” said Lilac CEO Raef Sully.
Lake is cutting most of its 180 workers but plans to keep a skeleton staff of roughly 20, according to a source with direct knowledge of the matter. Dickson declined to provide specific numbers, but acknowledged Lake “is in a process of cost cutting and resizing the company for where we’re at now.”
The move is the second blow to the Kachi project in the past year after the company said last June it would delay first production of 25,000 metric tons of lithium by three years to 2027 and more than doubled its capital cost estimate to $1.38 billion.
Lake is now looking to sell four lithium-rich acreage positions it controls elsewhere in Argentina and is likely to move out of its Houston offices to a smaller location, Dickson said.
The company hired Goldman Sachs last year to find either a customer for the Kachi project or an investor, a process that had been set to finish by December. That now likely will bleed into at least 2025, he said.
“We’ve got to find offtake partners and equity partners,” said Dickson, who joined Lake in 2022 after more than 30 years in the oil and gas industry.
The company is now working on obtaining environmental approvals from regulators in Argentina. Lake, which has roughly a dozen staffers maintaining the Kachi site, still plans to open the project by 2027 if lithium prices rebound, Dickson said.
“As soon as lithium prices go up, that’s when we’ll start to see movement,” he said.
(By Ernest Scheyder; Editing by Jamie Freed and Franklin Paul)
