Announcement PDF Annual Report 2024 lakeresources.com.au LAKE RESOURCES ANNUAL REPORT 2024 b CORPORATE DIRECTORY Directors Stuart Crow Non-Executive Chairman David Dickson Managing Director/CEO Robert Trzebski Non-Executive Director Management Don Miller Chief Financial Officer Justin Olson Chief Legal, Compliance & Risk Officer and General Counsel Mark Anning Head of Legal, Australia and Company Secretary Principal Registered Office and Principal Place of Business  Level 5, 126 Phillip Street Sydney NSW 2000 Tel: +61 2 9299 9690 Share registry  utomic Pty Ltd A GPO Box 5193 Sydney, NSW, 2001 Tel: +61 2 9698 5414 Auditor BDO Audit Pty Ltd Level 10, 12 Creek Street Brisbane Qld 4000 Solicitors  hite & Case W Level 32 525 Collins Street Melbourne VIC 3000 Australia Bankers Citibank, N.A., Sydney Stock exchange listings  ustralian Securities Exchange A (ASX code: LKE) OTCQB: LLKKF Website address www.lakeresources.com.au Amalia Sáenz Senior Vice President, Corporate Affairs and Country Manager, Argentina 1 LAKE RESOURCES ANNUAL REPORT 2024 FY2024 HIGHLIGHTS Successful lithium carbonate testing, one of the largest test programs undertaken by a DLE project Maiden Ore Reserve demonstrates Kachi project capable of delivering 25 ktpa operation US$2.3B 2 Production Environmental Impact Assessment submitted for Phase One of Kachi project Kachi Phase One Definitive Feasibility Study shows post-tax NPV of US$2.3B and IRR of 21% CONTENTS Message from the CEO 5 Message from the Chair 8 Review of Operations 10 Directors’ Report 17 Auditor’s Independence Declaration 55 Consolidated Statement of Profit or Loss and other Comprehensive Income 56 Directors’ Declaration 116 Consolidated Statement of Financial Position 57 Consolidated Statement of Changes in Equity 58 Consolidated Statement of Cash Flows 2024 Corporate Governance Statement 121 60 Additional ASX Information 138 Notes to the Consolidated Financial Statements 61 Resource Estimates and Governance 142 Schedule of Tenements 143 Consolidated Entity Disclosure Statement LOI signed with Argentine energy infrastructure company for Kachi power supply Post-balance date: Lilac Solutions identifies cost savings of up to 50% for DLE equipment and confirms long-term lithium recovery rates of over 90% Independent Auditor’s Report 117 115 Kachi Phase One Definitive Feasibility Study outlines clear path to 25ktpa battery grade lithium carbonate production with expansion possibilities subject to further study Lake cuts global headcount by additional 50%; strategic partnering process continues; noncore asset sale process underway for Paso de Jama, Olaroz, Cauchari and Ancasti projects 3 LAKE RESOURCES ANNUAL REPORT 2024 ABOUT LAKE RESOURCES Lake Resources NL (ASX:LKE; OTC:LLKKF) is a responsible lithium developer utilising state-of-the-art ion exchange extraction technology for production of sustainable, high purity lithium from its flagship Kachi Project in Catamarca Province within the Lithium Triangle in Argentina. This ion exchange extraction technology delivers a solution for two rising demands – high purity battery materials to avoid performance issues, and more sustainable, responsiblysourced materials with a low carbon footprint and significant ESG benefits. Decarbonisation will continue to drive significant lithium demand growth through the rapid adoption of renewable electricity generation and electric vehicles. Lake is building its business to meet the growing demand for high-quality lithium needed to meet the world’s decarbonisation ambitions. INNOVATIVE TECHNOLOGY PRODUCING HIGH‑PURITY LITHIUM Lake’s technology partner, California-based Lilac Solutions Inc, has developed efficient and disruptive clean technology to produce sustainable high purity lithium. This approach comes with a small environmental footprint, both physically and by returning almost all brine to its source. Lilac and Lake are working together to set a new standard for project development in the lithium industry. The demonstration plant has proven highly successful – independent testing of lithium carbonate produced from the Kachi Project in Argentina has confirmed grades and purity greater than 99.8%. 4 This is a proven and more efficient way to refine and produce battery-grade lithium carbonate. The ion exchange technology produces a lithiumrich solution without long lead-time and environmentally disruptive evaporation pond concentration – allowing Lake to produce high-quality lithium sustainably and at scale. Lilac and Lake are strategically aligned through a 25% project earn-in on the completion of technology testing, demonstration plant validation and end-product qualification. On 19 December 2023, Lake Resources announced the results of its Definitive Feasibility Study (DFS) for phase one of the globally significant Kachi lithium brine project in Argentina. The Kachi Project Phase One DFS demonstrates that Kachi is a top tier project, backed by a significant resource and strong economics positioning it competitively within the growing lithium market. LOCATED IN ARGENTINA’S LITHIUM TRIANGLE Lake’s flagship Kachi Project is in Catamarca Province within the Lithium Triangle in Argentina, one of the world’s key lithium regions – half of all global lithium resources are found in the Lithium Triangle. Lake also has three additional early-stage projects in this region. MESSAGE FROM THE CEO To my fellow shareholders, I am pleased to present Lake Resources’ FY24 Annual Report. Lake has had a significant year operationally, against a backdrop of challenges facing the broader lithium sector. I am grateful to our staff and everyone associated with Lake for remaining steadfast in their determination to build a better Company, despite facing extremely difficult market conditions. Our focus during this time has been, and will continue to be, on those things we can control, to ensure our Company is in the best possible position to benefit from the eventual upturn. The work done this past year has been very important in this regard, laying the groundwork for our future growth. DFS shows Kachi a top tier project Released in December 2023, the Kachi project’s Phase One Definitive Feasibility Study (DFS) demonstrated that Kachi is a tier one project, backed by a significant resource and strong economics that position it competitively within the lithium market. The financial highlights included a post-tax net present value (NPV) of US$2.3 billion and an internal rate of return (IRR) of 21%, with annual average EBITDA of US$635 million and an EBITDA margin of 76%. It would generate US$21 billion in revenue and US$16 billion in EBITDA for Phase One, making it a very attractive project. Importantly for our broader stakeholders, Kachi will advance sustainable and responsible lithium production through the application of ion exchange Direct Lithium Extraction (DLE) technology from our partner, Lilac Solutions. The Phase One DFS has marked a key milestone in Kachi’s development, building on the field, test and engineering work performed over more than two years and representing a credible and de-risked execution plan to support delivery of the project. Released in conjunction with the DFS, Lake also announced a maiden Ore Reserve for Kachi which demonstrated that the mine plan is capable of delivering sufficient lithium brine for a planned 25 ktpa operation. Significantly, the feed grade will average above 245 mg/L with minimal dilution, ensuring the operation can be developed in an environmentally sustainable manner. The Ore Reserve for the 25 ktpa operation extracts only a small percentage of the Mineral Resource Estimate. Prior to the release of the DFS, in August 2023 Lake further de-risked the DLE process following successful extraction and injection tests at Kachi. The testing confirmed highly favourable reservoir hydraulic properties at Kachi, allowing Lake to optimise the future wellfield. A month later, Lake announced the successful completion of a lithium carbonate test program, producing battery-grade lithium carbonate from Lilac DLE chloride eluate. These tests further proved the extraction technology, reinforcing Lake’s great confidence in the DLE process. And in November 2023, Lake reported another success with Kachi’s Measured and Indicated Resources increasing from 2.9 to 7.3 Mt LCE, with the total resource estimate exceeding 10.6 Mt LCE. These results highlight the continued resource growth at Kachi since the maiden resource estimate was announced in November 2018. Strategic refresh Lake started calendar year 2024 in a strong position following the successful Kachi DFS. However, the lithium market environment continued to worsen, requiring Lake management to rapidly adapt in order to preserve shareholder capital, extend its financial runway and ensure the advancement of value-adding activities. In March 2024, Lake announced a number of actions aimed at “right-sizing” the Company, including a substantial reduction in global headcount and other cost-saving initiatives. While these measures are never easy, they were necessary to ensure Lake preserves its financial flexibility amid difficult market conditions. Lake is also actively engaging with a number of potential strategic partners with the goal of securing a strategic equity partner for Kachi’s development. Concerning the project, there have also been a number of other milestones achieved during 2024, including the submission of a Production Environmental Impact Assessment (EIA) for Phase One of the Kachi project to the Catamarca Ministry of Mining in Catamarca Province, Argentina. 5 LAKE RESOURCES ANNUAL REPORT 2024 This demonstrates that Lake has given due attention to Kachi’s impacts on the environment and local community. Importantly, the EIA shows that Lake’s innovative and sustainable project development plan will have a small water footprint, amongst the lowest for lithium brine projects per tonne, compared to evaporation ponds or absorption DLE technology. Other environmental benefits for Kachi include its small land footprint and low solid waste output compared to traditional evaporation ponds and hard rock projects. Lake continues to put priority on caring for the environment and collaborating with the local community. We look forward to bringing future employment and economic growth to Catamarca Province, while contributing to the global energy transition. In another important operational update, Lake signed in May 2024 a ‘Letter of Intent’ (LOI) with YPF Luz, a leading Argentine sustainable electric power generation company. Under the LOI, Lake and YPF Luz are engaging in discussions regarding the construction of a high voltage power line to Kachi and delivery of the power supply necessary for the Kachi project. Establishing a power solution for Kachi is a critical milestone for the project’s development. Importantly, YPF Luz has demonstrated expertise in bringing power to remote areas of Argentina and shares Lake’s commitment to sustainability. Post-balance date, on July 1, Lake announced further cost reductions along with the exploration of a possible sale of non-core assets and lithium tenements located in Jujuy and Catamarca Provinces, namely the Paso de Jama, Olaroz, Cauchari and Ancasti projects. Given that Kachi is Lake’s flagship project, the timing is right for marketing the sale of these assets to optimise the Company’s financial runway. 6 Significantly, on July 19, Lake welcomed the release of Lilac’s fourth-generation ion exchange technology and technical white paper. The white paper showed Lilac has improved longterm lithium recovery to over 90% on salar brines and reduced core extraction equipment cost by up to 50%, resulting in total cost savings across the DLE technology of up to 25%. In addition, 10% lower reagent consumption is expected to positively impact project operating costs. These are substantial savings which we expect to enhance Kachi’s economics, potentially reducing the overall capex requirement by up to 10%. We look forward to working with Lilac to implement these improvements at Kachi, delivering a more cost-competitive project for the benefit of shareholders. Finally, my enormous thanks to Lake directors, employees, contractors and everyone involved with our Company after what has been an enormously challenging year. Despite recent difficulties, the longer-term outlook is extremely positive for Lake and the lithium sector. I hope you will stay with us for the journey as we work to deliver responsible lithium supply to facilitate the world’s energy transition. David Dickson Managing Director & CEO 7 LAKE RESOURCES ANNUAL REPORT 2024 MESSAGE FROM THE CHAIR To my fellow shareholders, Thank you for your support in what has been a year of substantial progress at Lake. In the short term, lithium is in a bear market, with prices having fallen significantly and new projects and investments being curtailed as a result. Ultimately though, we believe that the market will rebalance, with the long-term structural thematic underpinning lithium demand remaining intact. For example, based on today’s policy settings, almost one in three cars on the road in China by 2030 will be electric, and almost one in five in both the United States and the European Union, according to the International Energy Agency. Industry analysts, Benchmark Mineral Intelligence, project that the lithium market needs US$94 billion of investment simply to meet the anticipated 2030 demand, and double that to meet 2040 demand. Lithium demand is expected to double by 2026 and triple by 2030 from 2023 levels, presenting a compelling case for investment. Importantly, the lengthy lead times in developing new projects and recent curtailments could lead to lithium raw material deficits emerging from 2028 and extending to around 1.8 million tonnes LCE by 2040. In short, the world needs 100 Kachi Phase One projects to balance the market by 2030. Argentina holds 12% of global lithium reserves and is currently the world’s fourth-largest lithium producer, having some of the largest and most productive lithium deposits in the world. The recent passage of the ‘Incentive Regime for Large Investments’ has enhanced Argentina’s attractiveness as a recipient of foreign investment, with the current administration showing a positive stance towards the mining and lithium sector. The United States and Argentina are continuing discussions on facilitating greater bilateral trade and investment; talks which Lake welcomes. Through these talks, we are optimistic that a pathway will be found to facilitate greater Argentinian lithium supply into U.S. battery production, with potential access to U.S. ‘Inflation Reduction Act’ subsidies. It is therefore important for Lake to continue advancing our flagship project while preserving shareholder capital, ensuring that your Company is ready to seize the opportunities that will emerge from the projected supply deficit. In this regard, I would like to thank Lake shareholders for supporting our Share Purchase Plan and welcome all new investors who have participated in recent equity raisings. 8 It has also been refreshing to meet Lake shareholders during our recent investor briefings in Australia, to get first-hand feedback. All of the shareholder sessions we have held have been well attended, which is extremely encouraging, while we also continue to receive a positive response from many stockbrokers and fund managers. With the benefit of recent cost-cutting initiatives, including the significant reduction in global headcount, Lake has trimmed expenditures enormously, with consumption of cash reserves to reduce further through the second half of 2024. The potential sale of non-core assets in Argentina will also strengthen Lake’s financial position as we focus on our flagship Kachi project and its development, including securing a strategic partner. Lake also sees significant potential for enhancing capex and opex efficiencies between now and the start of production, with a number of optimisation opportunities identified. Adjusting to market conditions has required tough decisions by your Board. I would like to sincerely thank our former NonExecutive Directors, Howard Atkins, Dr Cheemin Bo-Linn and Ana Gomez Chapman, who all, further enabling the Company to adjust to market conditions, voluntarily resigned in July 2024 after making significant contributions to Lake. Looking ahead, Lake is continuing to advance the strategic partnering process for Kachi. We are focused on ensuring the process maximises Kachi’s value, with a competitive strategic partnering process to secure equity investment and offtake agreements. Because of the current lithium market conditions, we expect that the strategic partnering process will take longer than initially expected. The successful Kachi DFS has shown the value of our flagship project, and I am confident we will secure the right partner to drive our development journey. In this regard, our technology partner, Lilac’s recent progress has been extremely encouraging, positioning its DLE technology as a leader in the field. An ESG-friendly, sustainable production solution is essential for the communities where we operate together with global investors and industry players, and this is exactly what Lilac’s technology will help deliver with its higher lithium recovery rates, lower water and land usage and reduced solid waste volume. Lake also continues to build strong relationships with all levels of government in Argentina together with the local community and other stakeholders, ensuring we maintain a social licence to operate. Kachi’s development will deliver better infrastructure and significant employment and economic opportunities for the local community and we are working diligently to maximise the local benefits. Lake has continued to engage with the community, holding a number of public information sessions, while promoting training and other job opportunities as well as ensuring the health and safety of our workforce. As an investor it is important to evaluate any company on its merits. I believe Lake continues to offer a compelling opportunity, due to its robust market and project fundamentals; a globally significant resource and proven, sustainable production; and compelling project economics, with opportunities for further optimisation. The security of future lithium supply is virtually impossible without Argentina. Lake is in the right place at the right time with the right product for the global decarbonisation drive. Thank you again for your support and I look forward to meeting you during Lake’s shareholder meetings in Australia. Stuart Crow Non-Executive Chairman 9 LAKE RESOURCES ANNUAL REPORT 2024 REVIEW OF OPERATIONS Kachi Project It was an exciting year at Lake’s flagship Kachi Project in Catamarca. The JORC-compliant total mineral resource estimate grew significantly during fiscal 2024 to more than 10.6 million tonnes (Mt) of contained battery grade lithium carbonate equivalent (LCE), with 7.3 Mt of LCE in the Measured and Indicated Resource category. Additionally, significant project milestones were achieved, including: „ August 2023 – Successful extraction and injection tests. „ September 2023 – Completion of lithium carbonate tests by Saltworks Technologies. „ November 2023 - Updated JORC Mineral Resource Estimate. „ December 2023 – Maiden JORC Ore Reserve Statement. „ December 2023 - Phase One Definitive Feasibility Study (DFS) for the planned 25-year 25,000 tonnes per annum (tpa) LCE operation. „ March 2024 – Submission of the Production Environmental Impact Assessment (Informe de Impacto Ambiental Etapa de Explotación - Proyecto Kachi). Successful field operations and subsurface characterisation programs provided the expansive data set that underpinned these studies. The FY2024 field program was a continuation of the field program completed in FY2023, and included three drillholes and three pumping and injection tests on wells drilled in the previous fiscal year. Highlights included: „ Three drillholes completed to over 600m; all confirmed the presence of lithium brine in sediments similar to those encountered to 400m depth (Figure 1). „ The footprint of the lithium brine extent grew dramatically to the north and south, as well as vertically. 10 „ Higher grade lithium concentrations measured in the southern sector at K24D41 and K25D44 (Figure 2) returning grades of 180-348 mg/L lithium over 445m (166 – 610m) with an average of 267 mg/L and 230 - 302 mg/L lithium over 407m (215 – 622m) with an average of 257 mg/L, respectively. „ Northern step-out hole K23D40 intersected coarsegrained alluvial fan materials and averaged 228 mg/L over 322m with a maximum of 254 mg/L. This hole is 3.5 km northwest of K22R39. „ The consistency of the lithium concentration and brine chemistry in the new step out holes demonstrated how well the brine has circulated and mixed within the basin. „ Additional data from pumping tests and infill drilling has led to improved lithium grades in the central resource area. „ Extraction and injection tests confirmed highly favourable subsurface conditions (Figure 1) for both lithium extraction and injection in the central resource area where the Measured and Indicated Resources are located (refer ASX announcement 16 August 2023). „ Lithium carbonate tests conducted by Saltworks Technologies in Canada, producing battery-grade lithium carbonate from Lilac DLE lithium chloride eluate (refer ASX announcement 26 September 2023). Mineral Resource Estimate Lake’s concession holdings are expansive and cover an area of more than 103,000 Ha. The updated JORC-compliant resource estimate for the Kachi Project from November 2023 comprised 7.3 Mt LCE as Measured and Indicated Resource and 3.3 Mt LCE as Inferred Resource (Figure 2&3 and Table 1). „ Step-out holes and deeper drilling to 600m bgs (metres below ground surface) led to significantly larger resource estimates than previous mineral resource updates. „ Measured and Indicated Resources increased from 2.9 to 7.3 Mt of LCE defined to a depth of 600m over 143.8 square kilometres. „ Surrounding the Measured and Indicated Resources are Inferred Resources of approximately 3.3 Mt LCE defined over 130.9 sq km. „ The updated total resource estimate exceeds 10.6 Mt of LCE. „ Simulations indicated that the well-field design can exceed processing plant design capacity, with potential unconstrained potential for LCE production of 834,000 tonnes relative to the reserve’s 624,400 tonnes. „ Plant design capacity is the constraint for LCE production. „ Significant exploration targets remain and are estimated to contain between 3.6 Mt and 14.7 Mt LCE. „ Feed grade in Years 1-7 of operations is predicted to be 257 mg/L. „ The Kachi Mineral Resource Estimate has steadily grown in size since the maiden resource in 2018, adding more than 2 Mt LCE since 2023 (Figure 3 and Table 2). „ Feed grade in Years 8-25 of operations averages 245 mg/L. Ore Reserves Statement The extensive characterisation data set, inclusive of geologic, hydrogeologic, hydrochemical, and geophysical data formed the basis for the conceptual and numerical models that are the basis for the Ore Reserve estimate and Environmental Impact Study. „ Dilution as a result of injection of spent brine on the western and eastern margins of the well-field is minimal (less than 10% after 25-years of operations). „ Production in Years 1-7 is predicted to be 94% from Measured Resources with the remainder from Indicated Resources. „ Production in Years 7-25 is predicted to be 85% from Measured Resource with 9% from Indicated Resources. The JORC-compliant Ore Reserve Statement included the following key findings: „ Significant upside exists for larger production rates with total reserves representing less than 6% of the total resource. „ Modelling of the well-field development plan indicated the planned mine design will result in feed grades and rates in excess of those required to produce 25,000 tpa LCE over the Life-Of-Mine (LoM). „ Modelling indicates that the planned operation results in minimal changes to the hydrogeologic system, including environmentally sensitive areas. „ Ore Reserves (Table 3) were classified into Proved and Probable Reserves based on industry standards, the Competent Person’s experience, and confidence in data and hydrogeologic model performance. Phase One Definitive Feasibility Study „ The hydrogeologic model reproduced historical data very well, which improves the predictive reliability of the model simulations related to lithium recovery and injection. „ A post-tax NPV8 of US$2.3 billion and an internal rate of return (IRR) of 21%. „ Proved Reserves were specified for the first seven years despite very high production from the Measured Resource. „ Probable Reserves were conservatively assigned for the last 18 years of the LoM, as model reliability is expected to continue to improve with operational data. „ The well-field development plan includes 16 extraction wells and 21 injection wells, with extraction focused on the core of the salar where lithium concentration is highest. A major milestone for the Kachi Project was the release of the Phase One DFS. Highlights included: „ Targets battery grade lithium carbonate revenue of US$21 billion and US$16 billion EBITDA for the 25-year LoM. „ Targets annual average EBITDA of US$635 million and EBITDA margin of 76%. „ US $6.05 / kg of LCE estimated run rate Opex for Phase One. „ 25-year mine life supported by maiden Ore Reserve statement. „ Phase One targets production of 25 ktpa over the LoM. 11 LAKE RESOURCES ANNUAL REPORT 2024 „ DLE process tailored to mitigate impact on the local community with minimal disruption to land, freshwater table, and water usage. „ The Project targets production of consistent battery grade lithium carbonate (>99.5% purity) at site without the need for further refining or processing. „ Proven process from brine extraction to battery grade lithium carbonate. „ The Project operated two campaigns at the demonstration plant processing 5.2 million litres of brine and producing over 200,000 litres of lithium chloride eluate while also allowing for increased operational experience and optimisation of Lilac’s DLE technology. „ Additionally, the Project has produced in excess of 1,300 kilograms of >99.5% purity lithium carbonate at Saltworks’ demonstration facility to ensure that the commercial flowsheet will meet expectations and to have in place product samples for potential offtake parties. „ Utilising Lilac’s proprietary ion-exchange DLE technology eliminates the need for upstream or downstream evaporation ponds for lithium concentration, reducing the footprint of a traditional brine evaporation operation by >90%. „ The demonstration plant vessels, which hold the ionexchange material, are approximately one-third the size of commercial-scale vessels. This significantly reduces scale-up risk and increases process uptime. „ The extraction plant is conservatively designed for 80% lithium recovery within the DLE process and an overall plant recovery of lithium of >75%. Production Environmental Impact Assessment A comprehensive Environmental Impact Assessment (EIA) for production activities was submitted in March 2024. The EIA was prepared by global mining and environmental consultancy Knight Piesold with technical support from additional subject matter experts in groundwater modelling and Lake’s technical team. As part of the review process, the lead review agency, the Ministry of Mining of Catamarca, held a two-day presentation in July 2024 of the EIA led by global consulting firm Knight Piesold and Lake Resources’ technical teams. The meeting was attended by several government agencies participating in the EIA process, including the Provincial Directorate of Mining Environmental Management, Provincial Directorate of Social Promotion and Corporate Social Responsibility, Secretariat of Water Resources, Secretariat of Environment, Secretariat of Energy, Secretariat of Indigenous Affairs, Provincial Directorate of Archaeology and Palaeontology, and municipal authorities. As part of the meeting, Lake shared the highly advanced brine management plans, which have been developed to maintain baseline hydrogeological conditions by reinjecting spent brine and hence preserve environmentally sensitive areas. The project is designed with an industry-leading low freshwater consumption of less than 24 cubic metres per tonne of LCE over the course of the operation. Front End Engineering Design (FEED) YPF Luz has been advancing the FEED for the power delivery system for the Kachi Project. As of August 2024, significant progress has been achieved by YPF Luz including geotechnical investigations of some key infrastructure sites. The Environmental Impact Assessments for the Provinces of Salta and Catamarca will be submitted by Q4 2024, and the FEED Study is expected to be completed by the end of year. Site Reclamation As the project transitions from exploration to exploitation, Lake has been carrying out the reclamation activities required by the exploration permit. These efforts involve removing the majority of the temporary camp’s infrastructure, regrading and revegetation, and consolidating assets and offices into the former DLE demonstration plant building. As part of this process Lake has engaged with community members to ensure that local input is integrated into current site plans and the permanent camp configuration. Figure 1: Hydrogeological east-west cross-section of the Carachi Pampa Basin, illustrating the sand and silt units that dominate the salar area and coarser-grained materials of the alluvial fans west of the salar core. The thick sand horizons in the salar core are the focus of planned production wells with injection wel