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Price Performance (1-year)
*See important disclosures at the bottom of this report rating and risk definitions. All figures in C$ unless otherwise specified.
Located 220 miles southeast of Reno, Nevada. Lies in the Clayton Valley, adjacent to Albermarle’s Silver Peak lithium brine operations. Excellent infrastructure in place, including power and paved road access
Source: Company/FRC/Various/S&P Capital IQ
The updated resource estimate used a higher cut-off grade of 525 ppm Li vs 400 ppm previously
Source: Company/FRC/Various/S&P Capital IQ
While tonnage decreased by 30% with no material changes in grades, confidence in the resource has significantly increased. This is attributed to the new pit-constrained approach, offering a more realistic view of economically recoverable resources compared to the previous unconstrained estimate
We note that Zeus’ resources and grade are comparable to other well-known adavanced projects in the region
A major highlight of the new estimate is the inclusion of a high-grade component totaling 1 Mt at 1,121 ppm. This portion alone has the potential for a mine life of over 40 years
Majority of its resources occur near the surface, implying potential for lower OPEX
Noram aims to finalize a new mine plan prioritizing the extraction of high-grade ores before completing an updated PEA this year. The study will focus on mining ultra high-grade materials (54 Mt at 1,496 ppm Li), supporting a projected 15-year mine life, with an annual production of 23 Ktpa of high-purity lithium carbonate.
Based on the high-grade mine plan, we believe the upcoming PEA should return stronger economics
The 2021 PEA had returned an AT-NPV8% of US$1.30B, and a high AT-IRR of 31%, using US$9.5k/t LCE vs the spot price of US$13 k/
Healthy cash position, with no debt. NRM does not have to pursue any equity financings this year
Our DCF valuation increased from $2.93 to $3.22/share, driven by the new high-grade resource
NRM is trading at $6/t (previously $7.5/t) vs the sector average of $22/t (previously $32/t). By applying $22/t to NRM’s resources, we arrived at a revised comparables valuation of $0.92/share (previously $3.15/share
Our valuation is highly sensitive to lithium prices
We are reiterating our BUY rating, and adjusting our fair value estimate from $3.04 to $2.07/share (the average of our DCF and comparables valuations). Our valuation declined due to a steep reduction in comparable valautions. We believe the company's M&A prospects have improved significantly with the delineation of high-grade resources, which should enhance the project's economics.
Maintaining a risk rating of 5
We believe the company is exposed to the following key risks (not exhaustive):
