Lake Resources NL (LKE.AX) Earnings Call Transcript & Summary

Good morning, and thanks very much for joining us today for Lake Resources Operational Update. Joining us on today's call is Lake's CEO, David Dickson; Scott Munro, Head of Technology, Strategy and Risk; and Chief Financial Officer, Peter Neilsen. Following our presentation today, we will have a brief Q&A. You can submit your questions on the webcast platform. And I also want to thank all of you who have submitted your questions previously. We will cover as many questions as time allows for, and we'll do our very best to respond via e-mail to those we don't get to on today's webcast. Thank you for your interest and support. Before we get started, let me turn your attention to Slide 2, which states our disclaimers. We will be making forward-looking statements today, so please review this page. With that, I will turn this over to David.

Thank you, Karen, and welcome, everybody, to what is today a very important investor update with regards to Lake Resources company. Today, I'm joined with Scott and Peter who are here to share the work that's been done over the last 9 months and here to take as many questions as we can in the time frame. I will tell you that today, we are going to focus our attention really on the Kachi development. Kachi is, obviously, the largest asset that the company owns today and obviously is our primary source of revenue as we think about the future of the company. So really today, we are going to focus on Kachi. We're happy to discuss the other projects through the Q&A session. You'll also see as we are through the presentation, we're focusing our efforts on the operational update. So you won't see any slides about where we think the lithium market is. And if I can just add some comments there. So the Lake view today is that as we see the time ahead of this and as you look at our presentation, we are targeting production from 2027 is that we see lithium prices higher for longer as we see EV penetration start to come into places like the U.S. and in places like Europe. So from our perspective, we see also a fantastic opportunity here with this project. And obviously, a lot of question marks around where supply really is going to come from for raw materials and particularly, obviously, the lithium. What I would say though, in our view is that the market today on the supply side still remains fragmented with a number of projects being announced, a number of projects at different stages and a long way to go on a number of projects. So for our side, we see the market being fragmented, which, as we have seen recently in the market, a lot of consolidation or potential consolidation and we would expect that to continue over the next coming years. So I'm not going to spend too much time on the market, but again, happy to take questions on our views of the market moving forward. I also want to highlight, and I've said this in presentations before, if you look at our Kachi project, it isn't essentially a mining project. We look at it as being a mining plus specialty chemicals project. We're going to extract brine through a drill and extraction process, but we're going to extract the lithium from the brine through using DLE, but really through chemical processes. So as we look at this development and as we talk later about CapEx and OpEx, one thing to bear in mind is that we're actually building normally a mine, but our refineries. So it's very much very integrated. And that's something that I would ask investors to consider as we get through this and we start talking about CapEx, OpEx. The other thing that I've seen coming into the industry for only 9 months is there's not a huge amount of experience in building chemical plants. So as we get into the presentation later on, you'll see a number of things that we have done to bring in the relevant experience and expertise as we look to build a large chemical plant in a very remote part of Argentina. So as we go through the operational update today, I really want to focus on the significance of our growth in our resource base. And I've seen our JORC report, which was posted last week. I also want to explain why we've taken this approach to phase this development through 2 phases of 25,000 tonnes and then further breaking those 25,000 tonnes into 12,500 tonnes, which talks to the modular setup or buildup of this project, and I'll let Scott talk a little bit about that later. But all of this really is driven to what is the fastest path to get us to first lithium. This is what's critical for us. So again, as we go through the presentation, we'll go through a little bit more in the detail of that. But really, this whole idea of phased approach really is to get this company to first lithium and to start to generate some revenues. So that's what we're going to focus on today. I'd also say this is at a point where Lake Resources is at a point of converting what has been a vision today now into reality. So you'll hear us talking today about reality, you'll hear us talking about credibility. So this update today is extremely important. And hopefully, as we get through this presentation, investors will fully understand why we've taken this approach. The team that we've assembled, I came on board September last year and during that period, we've obviously brought in a number of people. And going back to what I was discussing about mining and specialty chemicals, we've built a team which is blended coming from 2 industries, so from both mining and both oil and gas and a number of these positions, obviously, we've announced over the last months. This team is now working extremely well together. I will highlight that one of the positions that we did change was Amalia Saenz move from being a Board member to a full-time executive and she is leading our efforts in Argentina. And I'll talk about that later because the Lake position in Argentina with regard to relationships has improved significantly over the last coming months. So that was a significant change to our team. But when you look at the team, it's focused on mining, processing, oil and gas upstream, but also a big element here is the ability to deliver large capital projects. And again, we'll touch on that a little bit later as we go through this presentation. Before we get into the actual technical operational update, it's worth mentioning and talking about Argentina. So lithium triangle plays a significant part of the supply of lithium in the future markets. Over 50% of all lithium is expected to come from the lithium triangle in which Argentina plays a part. Now today, our relationships in Argentina are good. We spent a lot of time working with government, and we've spent a lot of time working with regional government. Now question I'm always getting asked is, what is going to be the impact of the election, which is later this year on our project? I would say at this stage, it's far too early. It's very difficult to predict which way the election will go. However, when you see the commentary coming from the 3 parties, it is clear that all 3 parties really believe that lithium is going to be a big part of the future of Argentina. So at this stage, we don't see any particular difference or attitude that we'll see towards this market post the election. Now at a provincial level, at the state level in Catamarca, we have been building very strong relationships with both the governor and his team as we look to develop Kachi. Kachi is quite important project for this area. And again, I'll touch on this a little bit later. But certainly from the local state government, we're getting a lot of support in developing this Kachi development. The other thing to consider is election is going to happen in 2023. When you consider this presentation today, you'll see whether production start date estimated in 2027, we don't actually start spending a lot of dollars until 2025, which is going to be quite a significant period of time post election. So we'll start to think more about the election, the new government and how the impact could be to us once we see what happens and the results from this election. Now with actual project itself, we talked about our new phased approach. And once we get through it, I think it becomes clear why we did this. And the big driver for this is really focusing on things around risk, access to supply chain, access to resources, but also the ability to raise capital. And again, as we flick through these slides, you'll see the reasons why we'll come up with this approach. If you look back in the period of time since I've been on Board, which has gone back to September of last year, we've done a number of things. I talked about building the executive team. The other issue that we dealt with was the relationship with Lilac, our technology partner. When I came on Board, there was a concern about arbitration, some issues with Lilac, we are able to fix those issues. And I can say today, the relationship with Lilac is extremely good. In addition, we work closely with Lilac to develop the technology, and you have seen a number of releases that over the last few months, we really have proven the ion exchange Lilac DLE process. And today, we continue to produce lithium carbonate from the lithium chloride that was produced at the demonstration plant. So what you hear from us today is that on a Lilac situation, we're extremely happy. We're extremely happy how the development of the technology has gone, and we don't see that as an issue for the company moving forward. What you'll hear from Scott later on, however, is working with Lilac, we're looking at how -- what ways we can actually improve the process and more thinking about capital efficiency with regards to CapEx and OpEx. And I'll let Scott to touch on that a little bit. The other thing we're focused on is really on the drilling side and developing this resource base. And again, I'll let Scott go into the detail, but a lot of efforts really been focused on that. But also as we look at this project, that's when we start to say ourselves, okay, let's take time and reset. Initially, the company was going to build a one-off plant, 25,000 tonnes. Over a year ago, the company announced to build a plant of 50,000 tonnes. And as I said, we're now taking this whole vision into reality. And that's why we've opted to go for this phased approach, which, again, Scott will provide more detail. So we've gone through that process. We've validated our concept and the whole purpose today of our presentation is to present that concept to our investors. Now what I will emphasize is that also during this period of time, I talked about the executive team, but we spent a lot of time and effort bringing in a strong operational team. So a number of months ago, Lake was really lacking any technical and operational capability. So we brought in technology folks that can work with Lilac and represent and look after Lake's interest as this technology was being developed, and not only around the DLE technology, but also what happens downstream with regards to converting lithium chloride to carbonate and how do we get this carbonate to the eventual final product that we're targeting for. Also, we were weak in both the drilling and the geology side. So we've brought in a new drilling team. We've brought in a new hydrogeology team, and that has really strengthened up our understanding of what we have with regards to our resource base. And Scott, again, will touch on that a little bit later. And supporting all of that, we've also strengthened around our capability on our engineering procurement construction side, or EPC. And so we've brought in a number of folks, people that are very well experienced, a lot of capability with regards to building large process plants in very remote areas. So we brought in a number of people and a number of teams to build that up. So we really have transformed Lake Resources from where it was a year ago today having a very strong capability to deliver this exciting project. In addition, we brought in some support team, people that understand costing, estimating, the ability to put contracts in place with contractors and suppliers. Again, we've strengthened that part of the company. Scott?

Well, thanks, David, and good morning, everyone. It's nice to be here. So we've built this team and we've put them to work. And the first thing we asked them to do was to do a status check on where we were as a company for the Kachi development. It's important. In fact, it's more than important. It's critical in major capital projects that decisions are made in a timely manner, and they're made for the right reasons. And to make those decisions, you need the data. You need the data that's necessary to assess risks, opportunities and outcomes that you may encounter as you execute the project. So we put the team to work in assessing where we were in terms of maturity of the data and the decisions that we've made until this point. And what we found in our early efforts was a number of gaps in some critical elements of the projects. I won't spend too much time on them, but certainly on power supply and demand, we needed a stronger plan than we had. The resource, the reservoir, everything is built on that. We need to know as much as we possibly can about that reservoir so that we can plan for this project not only to date but over the life of the mine. It's a critical element of the project for us. There are also some gaps in logistics and supporting infrastructure. It is a remote part of the world. We wanted to make sure that we truly assess the risk associated with that and did we have the best plan for dealing with those risks. David mentioned previously, the relationship with our technology partner, Lilac, was in a little bit of distress at the time. We've turned that around. We've now got a one-team approach. They are providing technical expertise to the project as much as we are now, and it's working really well. And the last one is a little bit of a pet project for me, and I'd like to see some rigor in the decisions that we make. So not only is it a decision that everyone agrees with, but why did they agree with it. What financial outcomes would that create? What kind of assumptions went into that decision? And so we've now set in place a rigorous analytical process for decision making. And it's not just me that makes a decision. It's not just David. It's the entire executive team with the support of the technical teams, and then we take it to the Board and the Board do sign off as well. So I think now we're in a position where we can all say that we've assessed the project. We've challenged the key assumptions. We know which data we need to collect in order to move the project forward. And based on what we've seen, we've come up with this new approach to the project. I'll talk about that in more detail in the comments section. David also mentioned earlier Project Reset. Project Reset was when we really put the teams back to work on our new plan. We'll talk in detail on the brine to lithium carbonate, the relationship with Lilac was mentioned and the robust plan for completion of reservoir testing. What I want to touch on here really is this, reevaluated the project concept and selection of a lower-risk delivery option. For us, it seemed impractical to go with a big bang theory of project execution and build a world-scale plant from nothing as our first delivery project. We felt that, that carried significant risk. And when we run the numbers and looked at the areas of gaps that we had, we actually identified the faster path to lithium and the more profitable path to lithium for us was to take a phased approach. So not only do we derisk the project, but we actually deliver returns for the business in an earlier time frame and in a better present value over the life of the project. So that's why we've chosen the phase development to 50,000 tonnes. That will come in 2 phases of 25,000 tonnes each. And our initial Phase I for which we are now preparing DFS documentation will be for 2 trains of 12,500 tonnes. And you'll hear us maybe talk about that a lot from now is we're aiming for trains, repeatable modules that we can apply to this project. And potentially, if the project gets larger, we just keep applying them. So critical for us later this year, DFS for phase 1, targeting completion in December. Still a lot of work to do to get there, but we now know all of the work that needs to be done. There are no gaps that we envisage when we get to that point. And we think by December, we will have a very comprehensive package that truly meets the definition of a definitive feasibility study, a bankable feasibility study. One of our partners will be able to look at, perform diligence on and get all of the answers to the questions that they may have. So that's critical for us. We didn't want to deliver something that has so many gaps that people would have to revisit at multiple times. So that's it for DFS for phase 1, December this year. And then as we mentioned, the second phase of the project will carry out a separate DFS and EIA implementation, and you'll see the schedule for that later in the presentation. Moving on. One of the questions people will ask us, well, what benefits do you get from doing the phased approach. You can see here, we've listed some of the key qualitative upsides in this plan. I want to touch on 3 in particular. We really truly believe that we can derisk this project delivery by having multiple smaller repeatable units using our approach, design one, build many. It really means we can capture all the lessons learned from early phases when we execute the subsequent phase and not repeat the same mistakes. It also allows us to reduce our reliance somewhat on a grid connection for power. Power had been identified as a gap on this project. The full 50,000-tonne plant would have required grid connection for start up. There was no other way to do it because of the level of power required. By having these smaller modular units, the trains, we can actually commission and start up the first train without grid connection. So it delinks us from that delivery program for the grid connection and allows us to get ahead of the project and be ready for when the grid connection becomes available so we can actually start work before grid connection. One other element that had never really been considered before, and it's we're going to build this thing. We're going to live with it for a number of years, if not decades, so we really felt that having multiple trains gave us a real opportunity to manage maintenance throughout the life of the project. So greater operational resilience, it means that we can take parts of the plant offline for maintenance, repair, but not lose all of production, which is what our previous plan would have meant. So it really helps us for the life of mine planning for the project. And what you can see on the right-hand side of the slide here is what our ramp-up plan would look like. So yes, it's a phased approach. Yes, it's not everything arriving in one hit. But the delivery period is over a period of 3 to 4 years, and we are at full capacity. So if you benchmark against major capital projects, the ramp-up for these mega units tends to be long, 3 to 4 years. I think we will be beating that with our plan as it stands today. So that's why we've chosen the phased approach. The other work on Project Reset, so this is the data that we need to do the DFS. And the first part we'll talk about is on the reservoir and on the resource. So you saw that -- hopefully, you've seen the JORC report last week, which reported great results from the team. This is a result of drilling that's been going on second half of last year and into the first half of this year. And we've increased our resource significantly up to 8.1 million tonnes of measured, indicated and inferred. Great result. We've also bumped up our measure than indicated to 2.9 million tonnes 2.2 million tonnes. So all across the board, it's the direction we expect the project to continue to go. What I will mention, however, is in the exploration targets. We're seeing more upside potential on this project than we had previously envisaged. And we'll talk a little bit in a second as to why that is. But all in all, it gives us a great foundation that's one of the key building blocks for this project. I'll call it the 3 legs of the stool. This is one where we now got a solid leg to build the rest of the project on. I mentioned earlier that we saw some upside potential on the project, and this is one of our surprises, and it's a surprise to the upside. As you know, the plan for this project is to extract and reinject brine, and we were drilling potential reinjection holes to the north and south of the planned extraction areas. And what we found was more brine and more brine at project quality. So north of the plant design basis, the plant design basis is 205 milligrams per liter and the 2 wells that we drilled, we found brine in excess of that. What I will say is that the plant design grade is a conservative position we've taken. We don't want to have to go back and have to rework the entire project just because we have missed on the grade. So people may argue that it's a little bit conservative. But I think at this early stage of project development, we would rather have a little bit conservatism built into the program than none at all, and we think that's appropriate at this time. But for us, it was a surprise, and it was a surprise to the upside, which is nice. It's not always that surprises are pleasant surprises. Another part of the project that hadn't really been proven to everyone's satisfaction until recently was our plan for reinjection. Now reinjection into reservoirs is not a new thing. In adjacent industries, it's old technology. It's well proven. People have got a lot of trust in it. They understand what it does and why we do it. But for the lithium extraction industry, it's never really been something that people have considered mainly because of operation has been the technique for producing lithium. For us, we don't want to go down that road. We don't believe that's sustainable in the long term. We think it has too many environmental impacts. We think reinjection is a more sustainable way to approach this. So we've been working on demonstrating that both to ourselves and to the local authorities who have never come across this before. So in the first half of this year, we ran our first 2 high-volume pump tests between wells in the extraction areas, and we've reinjected successfully more than 30 million liters of brine. So great result for us, validating the model. It's critical that we are able to show that our model for the reservoir has the right parameters. These tests were part of that process and they have validated what we expected. And even better news for me is we've been able to take the local provincial regulators to site and participate in this work. So it's not a surprise to them when we come and say this is our plan for the project. So it's helped us build that relationship. We've had town hall meetings with the local regulator explaining what we're trying to do and show them the results. And I think that helps us to position for this type of project moving forward when the regulators are going to become very familiar with reinjection projects because we are not the only ones who are going to go down this track. So great result for the guys. First time that's been done in Catamarca in the mining industry and the guys did a great work to get us there. On the process plant, I think for us now that all the questions are around, does the technology work? Do you have the right technology? I think for us, those are behind us now. We have a process flow sheet that works from brine to battery-grade lithium carbonate. And not only does it work, it's consistent. We're getting battery-grade lithium carbonate from the brines without too much additional efforts. In fact, the comments that we're receiving back are that the lithium chloride that we're producing is exceptionally clean. We have extremely low levels of impurity. We mentioned in our press releases before about the 90% impurity removal. Not being a process technology guy at the heart or a chemical engineer at heart, I am always reminded by the chemical engineers that, that really means that we removed more than 99.8% of the ions within the feed brine. For the chemical engineers, they were all very excited about that. I was just very excited to see that we could produce lithium carbonate successfully and repeatedly on this project. Great thing for us now. We've got samples in hand. We will be finishing our work at Saltworks in Canada through July. And at that point, we will have samples available to have tests with offtakers and start that negotiating process with them. So for us, technology qualification is behind us. We're very confident of our brine to lithium carbonate pathway. Time is now for us to get focused on project planning, execution and optimization. As David mentioned, what we need to now do is turn this from a size project to a real project. We need to make this the most efficient project we can. And we've got the support of Lilac to do that, and we've got the team internally capable of pulling that together now. So we feel really confident on that part of the project. Moving on. You've obviously heard Lake talk about DLE for a long time now. What does it mean in practical terms? Well, we think it means cleaner lithium by design. And when we say cleaner lithium, it means a lower impact on the environment. We get higher recovery rates. We are planning for 80% recovery rates in the DLE part of the plant. Yes, we could have aimed for higher if we chose, but we felt that's where the commercial balance was going to be reached, so that's what we've aimed for. But we're still significantly ahead of both hard rock and evaporation points in terms of stewardship of the resource, why leave it all behind in waste piles or in the ground. Lower water usage, this is a key area of focus for the communities in which we work. Key water -- lower water usage is critical if they're going to give us a social license to operate on a long-term basis in Argentina. We've seen other communities across South America who decided that they don't like the impact these projects are having on their water tables and on their environment in general. What we're trying to do is put together a project that people can live and thrive alongside and not be complaining about it and our main feature for that is water usage in our opinion. We are order of magnitude lower when it comes to things like brine water usage. And even on freshwater usage significantly lower again than both hardrock and evaporation point. Other areas that local communities are concerned about is land usage. Yes, people might look at the landscape and think it looks rather barren and there's not much going on there, but the communities that live there have an ecosystem. Their farmers, they raise llamas, they raise, they work with the vicuñas that live semi-wild in the area. They don't want thousands and thousands of acres of their land covered with evaporation ponds or dug up for recovery of hardrock mines. We believe we offer the lowest footprint. We believe we can work successfully these communities moving forward. We think it's a big advantage for all DLE projects moving forward compared to the existing infrastructure projects. And then last, again, in terms of the solid waste that we produce, mainly because we don't actually capture a lot of the things that we don't want, most of the things we don't want get rejected through the DLE process and we reinject back into the reservoir. So our levels of solid waste are exceptional in comparison to the two alternates. So for us, this is about being positioned for the future. We believe people will put a premium on this over time, both from a license to operate, but potentially even for those end users who want a premium product. I mentioned previously as well, the power solution. Power solution is in the earliest the least mature part of our project in terms of the data we have and the information we can put to work when we're doing analysis. However, we have progressed and completed technical feasibility studies in country with a local EPCM provider. And so we actually -- we have now both modeling for the grid, but also route plans to get us connected to that grid. Now that we've got the feasibility studies, we need to move into the next phase. And in the next 6 months, we're focused on engaging with a regulator, who is supportive of the project and with independent power producers. Independent power producers have shown a lot of interest because there is a significant number of mining projects in our area who want power and they want to be the people to provide that power. So far, we've shown -- we've seen a lot of interest. We need to turn that interest into plans and into commitments moving forward. So what does that mean for us in terms of development time line. So you see here, and I've mentioned it before, DFS in December, we want that DFS to be complete. We want it to be bankable. We wanted to have all of the major questions asked and answered, and we want to put together a complete package so that people can assess this project on its merits fully without coming back with questions. That will then drive us into EIA submission. And we've -- again, people may feel we've been a little bit conservative, but we've left 12 months to get the approval on that EIA because this for the Catamarca authorities would be a first-of-a-kind project that uses both ion exchange DLE, but it also has the reinjection component I've mentioned before. So 12 months is a longer time frame than other mining projects in the area, but we think, again, it's prudent to tell you a little bit extra time because we need to show and provide the data to support the positions that we're taking. That then leads us into the project approval at the start of 2025, first lithium 2027 and full ramp up by the end of -- near the end of 2028. That gets us in full production for phase 1. And as you can see there, phase 2, we're planning to have the DFS and an EIA amendment at the end of 2026. And EIA amendment is much simpler than an EIA submission and initial approval. So again, one of the reasons for phasing this project is taking those smaller steps with more surety means we've got a clearer path to get an approval on the project we believe. So this is a new time line. This is what we're aiming to achieve, and the team is fully engaged on that.

Thank you, Scott. So we couldn't do a presentation without giving some numbers. So the first thing here to really, really emphasize. These numbers are the result of this preliminary analysis work we've done. So they're not DFS numbers. We are 6 months away from DFS. And from now until time line DFS, obviously, we're really going to close down on a number of what you see are ranges on this particular slide. So we're showing here our ranges on 2 critical components, which is both the CapEx and the OpEx. And you'll probably ask why are these ranges so wide? Well, it's just simple. It's just a case of the fact that we're just not that well defined on the actual phase and what these phases and plants will look like. Same as on the operating cost. There's still a number of issues that need to get resolved. You heard from Scott we've got to look at the power logistics infrastructure. And as we progress this next 6 months, we'll obviously tighten up on these bands to get within what is normal in the DFS range of plus or minus 15%. Saying all that, if you look at these numbers and you take midpoint on capital costs and take midpoint on our OpEx, you can still see that this project has extremely strong EBITDA numbers. And if you look at the chart on the right-hand side, we're taking a look at lithium price in one just under $24,000 a ton, which is one of the predictions for longer-term lithium pricing. But also, we've run the numbers looking at where spot price for lithium is as of last week at $45,000 a ton. And again emphasizing, this is only for phase 1 only. So this is for 25,000 tonnes. So the numbers, EBITDA numbers are very strong. But again, we have a lot of work to do on our side to really hone in on these numbers, particularly with the ranges with regards to CapEx and OpEx. So you've heard from Scott, a lot of work to be done on the engineering side, a lot of work to be looking at on the supply chain side, but also a lot of work to be done on infrastructure and logistics. Following on from what Scott said on the ramp up, so our view is that by ramping up in the 2 phases and then splitting the phases into these plants or trains is that we feel that not only it reduces the risk, but also unlocks value and allows us to accelerate first lithium into 2027, which is also primarily driven by access to power. And again, you heard Scott talk about that. So a lot of what's going to happen is really is driven by both Power and the logistics in that part of Catamarca in Argentina. But we believe by doing this, and I mentioned this in my opening remarks, this is all about how we can derisk, but also provide surety around execution. And this methodology is obviously common in other adjacent industries. You look at the LNG and oil and gas world. This is very similar to how an LNG facility is built through a number of trends. So we're actually adopting techniques or concepts that are already well present in oil and gas being very successful. We're just bringing that into our project for Kachi. Little bit on where we are with our other stakeholders. We have spoken a lot about Lilac, relationship is good. Nothing else to add there. On the financing side, so before we presented or come out with this update, we've actually spoken to all of these groups are obviously under NDA. All these groups are very supportive of this phased approach that we are taking. They fully understand the risk element, which is obviously critical to the banks, but also our offtakers fully understand the process of why we've taken this process. So engagement is good. We have regular dialogue and we'll look to continue that dialogue as we move to the point of our DFS. I want to come back again to the community side. And that is, as I said earlier at the start, we've done a lot of work, not only in Argentina with federal government and with the provincial government, but we're also doing a lot of work with the local people who live close to our project. So we're doing a lot of work in the towns of El Penon. We've actually opened an office there. We now are spending a lot of time getting the local population involved in our project, understanding what it is that we are doing right, everything from the drilling side, the plant that we're going to build, the infrastructure that it's going to take, but more important is we're also addressing the whole environmental impact. And one of the things that we feel about what we're doing at Lake Resources you heard from Scott, is we are looking at changing the industry and that we are looking at extracting lithium in a very responsible way. And what I can tell you is that working with local communities, this is getting a huge amount of support. So we see DLE, we're looking at reinjection really as the way forward for the industry. And I can tell you that the local employees -- the local population in Argentina are very supportive of that, including the governor of the state of Catamarca. So what next? So over the next 6 months we heard from Scott, we've really got to focus on homing in and completing the DFS. Yes, we've delayed it again, but there's a number of reasons why we did that. You heard from Scott, we've got to do more evaluation work on the reservoir site, right? Good news, we find more brine. Unfortunately, we still have to find or look at other water reinjection site. So clearly a good news scenario, which indicates that the reservoir that we have found obviously is expanding. So a lot of good news. However, we got some more work. We have to complete before we can -- before that piece of work goes into the DFS. Our big focus is getting us to DFS completion in December. The other reason why slightly delay in the DFS is we firmly believe is that we want our DFS to not only be complete but comprehensive. The DFS is a trigger for a number of things for us. One is negotiating our deals with our offtakers, but it also starts the process of working with our banks who are looking to raise the project financing for this project. So the quality, the level of detail in our DFS is extremely important for us, and we feel that by the end of the year, we will be in a good shape. Following that, we'll then move into obviously, submitting our EIA in early '24. And as I said, with the submission of the DFS or publishing the DFS, then we'll start to work with due diligence with our bankers, but also negotiating the agreements with our offtakers. So that really is our focus for this next 6 months, which takes us up until the end of 2023. So just to close, I started with talking about credible, things are achievable, things that are real. I talked about taking the vision of Lake Resources into reality. And that's where a lot of work we've been doing over this last 9 months. So what's critical for us, really developing this resource base. A lot of good news. Still got a lot of work to be done, but everything is moving in the right direction. With the work we've done with Lilac improving our technology, our focus now is how do we actually build this project, how do we actually build this chemical plant? As I said, this is not a mining project. It's a specialty chemical project. So we've got to really focus on how we build that. And as a result, that's why we're focusing on this whole phased approach. So time to first lithium is really a big focus for us. And we believe that the approach we've taken and the update that we provided with you today really is the best way forward for Lake Resources. So I want to thank the team for all the work that they've done. I believe today, we are now presenting what is a very credible and real method is a certainty Lake from a vision into reality. So with that, I will hand it now back to Karen and look forward to taking some questions.

Thanks, David. The first question we had today is, what hurdles do you foresee in your time line to the DFS and FID?

It's a good question. I'll start and then I'll let Scott add. I think we touched on it. So the resource base is good. All the indications are good. We have some more testing or work to be done around water modeling. We got to find the reinjection location, et cetera. So a bit of more work to be done there. Where our biggest focus, though, has to be, and I'll let Scott put his comments on this really is around power and more around infrastructure and logistics. Our site is remote, it's accessible. It can be overcome. It just has to be planned and worked out. And so a lot of focus between now and the time of the DFS is ensuring that we've got a definitive plan around infrastructure and logistics. Scott, do you want add anything to that?

Yes. I mean it's been, again, one of the things that we've focused on before we came and gave this presentation is we didn't want to come with a date that was just plucked out of there. So we have put together detailed bottom-up generated schedules for each of the work streams involved in producing this DFS. David mentioned it. The water model is a critical part of this. It also feeds into EIA submission. But yes, the parts where we have the most scope for variability between now and the publishing of the DFS are around power and infrastructure and logistics. And when you look at the big gaps, the big ranges on OpEx, it's primarily driven by those 2 elements alone. So yes, we've got a lot of work to do between now and December, but we've got a clear plan for that. We've got the resources in place to do that. We've got the governance in place to make sure that we stay on track. Any time we deviate from that with the team step in and try and get it back on track. So I think we now have the processes in place to deliver in December as we're planning.

Great. How will you fund the project?

Karen, I'll take that question. Thank you very much. We are still targeting 70% ECA financing for the project. We have an excellent relationship with our ECA finances. And as David spoke about before, we fully briefed them on the operational update, and they remain very supportive of the project. Lilac will also be an equity contributor to the project. And the remaining equity required, we will continue to assess our funding options, such as equity and also financing under our conditional offtake agreements.

Great. Thanks, Peter. Next question is around why we haven't been more engaged with investors, providing more frequent updates to the market.

I think that one obviously is a great question. Yes, the challenges that we've had is that we have -- we've been working in the last 6, 9 months to really put more definition around Lake Resources as a business and more specifically around Kachi project. As a result, that has meant for the last couple of months, we've had to be quiet as we have gone through looking at the evaluation of what the options have been for us. And as part of being ASX listed, there are certain disclosure requirements and things that we say or we can't say. So we have to work with all these conditions. What I would say is that today is the day that we are cleansing the market with this information. This is a plan moving forward. And Karen, you and I will work to really get more engaged with investment community. And I would encourage everybody to reach out to Karen, happy to get on the phone, happy to meet but really want to get this story out there because we really feel this is a real credible and real story. In a project when you look at the financials, the financials are exciting. So it's a good business here. It's a good project. We've got a good team together. But we can now start talking to the investment community, and we have something to talk about. And I think before, that was something that we were lacking. We were talking about a vision, now we're talking about an actual project. So absolutely, it's a great question. And me and Karen, we're fully committed with the team to getting out there with the investment community.

I completely agree, David, and I am very excited to get out there and tell about Lake story more as well. Next question is around Lilac and whether they've completed all their testing to date. Can you talk about that?

Yes. So the program we worked for Lilac is complete essentially. So they've hit all other milestones that they have full control over. So we've produced all of the lithium chloride necessary to meet our milestones and get all the data we need to support the work. The next -- the testing -- sorry, the demo plant work that hasn't yet concluded. There's work under our control at Saltworks, that will be finished within the next 6 weeks. And we expect to get the report on hand in September, so well before the publishing of the DFS. So what I will say though, however, is we're not finished with our engagement with Lilac. We are continuing to have ongoing dialogue. We want to identify areas of optimization for the next -- for the full project. We want to look at ways to optimize for both OpEx and CapEx and how we deliver this project. And I say one of the good things that we've found in the last 6 months is Lilac have been growing roughly at the same time we've been growing. And so when we have the technical engagements now with them, they've got the technical expertise they need for project delivery, and we've got it, and we can sit and have a discussion like equals. And although they have finished all of the testing, they're not going away. They will be fully integrated in this project, and they are fully integrated in delivering the DFS for that December time frame.

And I'd add to what Scott said, and I mentioned it earlier, is a lot of the work ongoing now is we've proven the technology, we prove the beads work. We prove we can extract lithium and we've proven that we can convert lithium chloride to high-quality lithium carbonate. The big focus now is working with that process to really improve on things around capital efficiency, so cost of CapEx and cost of OpEx. And actually now where the Lilac team with the Lake team that we're focused on is we look at taken what is a small demo plant into, obviously, a large or larger production. So a lot of focus is going to be in that area.

And just to finish on, obviously, the focus for the team in the next 6 months is to try and get the CapEx and OpEx numbers to be at the lower end of those ranges that we gave everyone. That's what they get up in the morning for and that's what they go to bed thinking about. It's how we get those CapEx and OpEx numbers down to the lower end of the range.

Great. Well, thank you. That's a great segue to our next question, which is what determines where you land in your ranges for CapEx and OpEx?

Well, under the work on the DFS, I mean, obviously, we're going to look at tightening our ranges into plus or minus 15%. That appears to be obviously what is industry normal. And I think at this stage with the work that we're doing, I think we're confident by the time we get to the end of the year is that we'll have pulled in on a number of things. A lot of work has already been done on the supply chain. As we've said a few times here, today where we've got a lot of focus on is the cost things around infrastructure and logistics.

Just taking a slightly different turn here. We never hear a lot about your other 3 projects. Where do they stand? And can you just elaborate on your plans for this?

It's a good question. I didn't mention in the start that we would focus today on Kachi because I would say, strategically, we're focused on getting this company to first revenue and obviously first lithium. On other three projects, all 3 areas are going through a process of local permitting. And we haven't put a lot of focus on it. What I would say now is that now that we have got to the point we are in Kachi is that we are going to have a little bit of shift in focus with some of the team looking at these 3 other areas and looking at strategically, which of those areas are promising for Lake Resources and what work has to be done to get us to that point. So it's more of a strategic view of those 3 areas. But up until this point, I've had the team really, really focus on how do we get Kachi to this point where we are today.

Great. A question on our newly discovered brine. Does that newly discovered brine have similar properties to what we've been working with. And will those brines work with -- well, the newly discovered brine work with Lilac's ion exchange process?

So the brine that we're finding in the whole area in the whole valley is similar in terms of the content, sometimes it's a little bit higher lithium content, sometimes a little bit lower. But in terms of the other impurities, we've not seen any spikes that would say that we've got significantly different brine results. So the brine although it vary, it varies within a relatively tight band. And therefore, we're pretty confident that -- more than pretty confident, we are confident that the Lilac technology will apply throughout the reservoir area.

I think just to add to what Scott said on Scott's slides, we are seeing the quality of brine with regards to lithium content better than what our design basis is based on. Now what does that mean in terms of CapEx and OpEx? We haven't evaluated that. But what's good to see is that we're designing on the more conservative side of the quality of the brines that we're actually seeing from the drilling and evaluation work. So we'll see how that progresses over this next coming months.

Great. I think this will just be the last question that we have time for today. But can you speak to why we are seeing so much -- why we've seen discrepancy in the purity levels of that brine? Why aren't you producing brine at a purity level of 99.7%?

So it's the lithium carbonate. So the results that we published about being in excess of 99.8%. And obviously, our aim is to sell this product. And the benchmark that we will be selling against is greater than 99.5%, which is battery-grade lithium carbonate. We could produce at a higher rate of purity, but to be frank, there is no premium in the market available to do so, so why should we. Again, this isn't a science project. This is about building a commercial real deliverable project. So we want to deliver something that our offtakers want to buy. So yes, we will have discussions with offtakers around some of the smaller level of impurities. But we are not -- unless someone wants to put a lot of money on the table to say we want 99.97%, then we're quite happy with 99.8%. We will keep working to give us the best process and the most efficient process. But this is about delivering an economic project for us as a company, so we can deliver for the shareholders.

And just to add on what Scott said. I mean, what's critical here is in our discussions with the offtakers, what is it that they want delivered from us and we can move from 99.8% to higher purity. But as Scott said, it's just additional capital. And so we need to look at what is the value and the return on that additional capital. So at this point, we are happy and Lilac, we're all happy with the quality of lithium carbonate we have today. We don't see the need to spend any more money to improve that. We don't see what benefit it brings. But ultimately what's going to decide things is where we land with our offtake agreements.

Great. Well, I think we're out of time. And for those questions that we did not get to on today's webcast, I want to assure you that we'll respond as soon as possible. And again, we thank you very much for your support, your time and your interest in Lake Resources. Thank you very much for joining us today, and we look forward to updating you shortly.

Thank you.

Thank you.