Lithium Co., On Cusp of Mine Construction, Undervalued

Source: Katie Lachapelle 12/11/2024

This near-term producer has potential financing in place to advance its project in Brazil, where it continues to expand the mineral resource, noted a Canaccord Genuity report.

Lithium Ionic Corp.’s (LTH:TSX.V; LTHCF:OTCQX; H3N:FSE) latest drill results show continued expansion of its Bandeira lithium project in Brazil, reported Canaccord Genuity Analyst Katie Lachapelle in a Dec. 4 research note, following a site visit.

“Drill results suggest continued resource upside, both within known pegmatites and across previously untested areas,” Lachapelle wrote.

Stock Undervalued, 194% Return

Canaccord Genuity maintains its Speculative Buy rating and CA$2.50 per share target price on the hardrock lithium developer. Lithium Ionic currently is undervalued, highlighted Lachapelle, now trading at about CA$0.85 per share.

This is evidenced, the analyst purported, by the US$369.4 million (US$369.4M) price Pilbara Minerals Ltd. (PLS:ASX) recently paid for Latin Resources Limited, reflecting a 67% premium to the latter’s share price at the time. Like Lithium Ionic, Latin has a lithium project in Brazil’s Lithium Valley, called Salinas, which is at an earlier stage than Bandeira (preliminary economic assessment versus nearing final project approval). As for each project’s resource, Salinas’ is 77,700,000 tons (77.7 Mt) of 1.24% lithium oxide (Li2O), Bandeira’s is 60.1 Mt of 1.28% Li2O.

“We therefore believe Lithium Ionic is oversold, owing to negative recent commodity price sentiment and questions around project funding (now likely resolved),” Lachapelle wrote.

Resolution of the question of funding, she explained, recently came for Lithium Ionic in the form of a letter of interest from the Export-Import Bank of the United States (EXIM) for up to US$266M in debt financing, an amount that would cover Bandeira’s capex.

“Final closing is contingent on EXIM’s completion of due diligence,” noted Lachapelle.

In the meantime, the Canadian lithium developer remains well-funded, the analyst wrote, with about CA$30M in cash, enough to advance Bandeira to a final investment decision and to possibly commence early construction work.

“We believe that the company is also well-advanced in potential offtake discussions, which could be an incremental source of funds,” wrote Lachapelle.

The return to Canaccord Genuity’s target price on Lithium Ionic from its current share price is 194%.

Mineral Resource Growing

Meanwhile, Lithium Ionic keeps expanding the resource at Bandeira, Lachapelle wrote, citing about a 6.4 Mt of growth since the feasibility study (FS) was done.

Bandeira’s current resource is 23.6 Mt of 1.34% Li2O (+12% contained). In comparison, the FS was based on total ore mined of 17.2 Mt at a run-of-mine 1.16% grade (diluted) and a Measured and Indicated resource of 20.9 Mt of 1.35% Li2O. The operation outlined showed average annual production of 178,000 tons of 5.5% spodumene concentrate over a 14-year life of mine.

The project’s resource “continues to expand, in our view, based on today’s results,” Lachapelle wrote. “As such, we view a mine life of about 20 years as a probable outcome.”

The latest drill results the analyst referenced include these highlight intercepts:

• 16 meters (16m) of 1.77% Li2O from 137.41m, including 9m of 2.36% Li2O, from hole ITDD-24-280
• 19.6m of 1.33% Li2O from 83.7m, including 8.47m of 1.81% Li2O, from hole ITDD-24-268

Some of the holes intersected grades higher than that of the existing mineral resource. According to Lachapelle, the average grade of the new results is 1.43% Li2O.

What To Watch For

Lachapelle listed several events that could boost Lithium Ionic’s share price.

One is recipe of the construction permit for Bandeira. Confirmation of the EXIM financing is a second. Any offtake agreements or mergers and acquisitions activity constitute other potential catalysts.

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1. Lithium Ionic Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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Disclosures for Canaccord Genuity, Lithium Ionic Corp., December 4, 2024

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