A Deep Value Play with a Promising Early-Stage Lithium & Copper Portfolio

Report Highlights

• The mineralization of CELL’s lithium projects (Texas Spring, Clayton Valley, and Volt Canyon) is similar to that of advanced stage projects in Nevada, such as Lithium America’s (TSX: LAC/MCAP: $1.07B) Thacker Pass project, and projects held by Ioneer (ASX: INR/ MCAP: $359M), American Lithium (TSXV: LI/MCAP: $142M), and Surge Battery Metals (TSXV: NILI/ MCAP: $64M). Based on the projects’ similarities and proximity, we see opportunities for M&A/consolidation in the region. General Motors (NYSE: GM) recently acquired a 38% interest in Thacker Pass for US$625M.
• CELL recently completed a five-hole drill program at its Clayton Valley project, located adjacent to Albemarle’s (NYSE: ALB) Silver Peak mine, the only lithium-producing mine in North America. Assay results are pending.
• We believe the company should be able to complete maiden resource estimates for its Texas Spring and Clayton Valley projects within the next 12-18 months. The company is also planning preliminary exploration at the copper project, followed by a drill program in late 2025. 
• With copper trading near record highs, we expect increased M&A activity over the next 12 months, as larger companies target juniors to expand their portfolios. Lithium prices have dropped 22% YoY to US$10,300/tonne, down from record highs exceeding US$78,000/tonne in 2022. This decline is attributed to a persistent supply surplus, and slower growth in global electric vehicle (EV) sales. We believe that current lithium prices are nearing the break-even point for most large-scale development projects, raising concerns about their economic viability. We believe prices need to be at least US$15,000 /tonne to incentivize developers and financiers to advance projects. We maintain a positive outlook on juniors focused on EV metals, as battery and EV manufacturers and miners continue to seek stable, long-term supply sources. Last month, Lithium Chile (TSXV: LITH) attracted a large, Asian diversified enterprise to acquire its lithium project in Argentina for $250M.
• CELL is well-capitalized for 2025. Upcoming catalysts include drill results, the closing of the copper project acquisition, and increased market recognition of the company's strong cash position relative to its MCAP.

Price Performance (1-year)

Portfolio Summary

Three early-stage lithium projects in Nevada, and one copper project in B.C.  Two flagship assets: Texas Spring and Clayton Valley in Nevada

Nevada is well-known for its claystone lithium deposits

British Columbia Copper Project 

Located in the Omineca mining district in B.C., an area renowned for its porphyry copper-gold deposits

CELL can acquire this 27,525-hectare property for $48k in cash, and 5M shares, from AC/DC Battery Metals (TSXV: ACDC). The project is near NorthWest Copper Corp.’s (TSXV: NWST/MCAP: $72M) Kwanika-Stardust project, which hosts three porphyry deposits with 1.75 Blbs of CuEq in resources. 

The region hosts numerous copper-gold mines/deposits. The project can be accessed through paved and gravel roads. 55 km northwest of Centerra Gold’s (TSX: CG) operating Mt. Milligan mine

Mineralization 

The property lies within the northern Quesnel Trough, which hosts numerous copper-gold mines, including Hudbay Minerals’ (TSX: HBM) Copper Mountain mine, Centerra Gold’s Mt. Milligan mine, New Gold’s (NYSE: NGD) New Afton mine, and Teck Resources’ (NYSE: TECK) Highland Valley mine.

Management plans to initiate a small exploration program, followed by geophysics, sampling, trenching, and geochemistry, leading up to a 6-12 hole drill program in late 2025.

Clayton Valley Lithium Project (100% owned)

CELL’s Clayton Valley project borders Albemarle’s Silver Peak mine, which has been producing lithium since the 1960s. It is also near Century Lithium’s advanced-staged lithium project.

Minimal exploration to date; stream sediment sampling returned anomalous gold values, warranting further evaluation

Potential to host both lithium brine and clay deposits

The Clayton Valley region hosts America’s lone lithium mine, and several advanced stage lithium projects. Located approximately 273 km southeast of Reno, and 315 km from Tesla’s (NASDAQ: TSLA) Gigafactory

CELL recently completed a reverse circulation (RC) drill program consisting of five holes totaling 4,730 feet. The majority of these holes intersected hot spring-style alteration within travertine and tufa rocks, which suggest the presence of geothermal waters that could potentially mobilize lithium from deeper layers.

Drilling was designed to test the depth and extent of lithium-bearing brine and claystone. Assay results pending

We believe the company will be in a position to complete a maiden resource estimate within the next 12 months.

Financials & Valuation 

$5.1M in working capital at the end of September 20224. None of the outstanding options/warrants are in-the-money

We continue to value the company based on our preliminary speculative estimate of 0.7 Mt LCE on Texas Spring. CELL is trading at just $3/t LCE (previously $4/t)vs the sector average of $46/t (previously $51/t), making it the most undervalued junior on our list

By applying $46/t to CELL’s resources, we arrived at a comparables valuation of $0.19/share (previously $0.22/share)

 

We are reiterating our BUY rating, and adjusting our fair value estimate from $0.22 to $0.19/share. Note that this valuation is solely based on our preliminary speculative resource estimate on Texas Spring, with no value applied to other projects for conservatism. The absence of an NI 43-101 compliant resource estimate may deter some investors. However, we believe our preliminary estimate on Texas Spring provides the market with an indication of its potential. The company should be able to complete a maiden resource estimate for Texas Spring and Clayton Valley within the next 12-18 months. Positive results from preliminary exploration on its new copper project would be an added bonus, as our valuation does not factor in this upside.

Risks

We are maintaining our risk rating of 5 (Highly Speculative)

We believe the company is exposed to the following key risks (not exhaustive):

• The value of the company is dependent on lithium and copper prices
• Access to capital and share dilution
• No NI 43-101 compliant resource estimate
• Exploration and development 
• No assurance that the company will be able to advance all of its projects simultaneously