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Price Performance (1-year)
*See the bottom of the report for disclosures, ratings, and risk definitions. All figures are in C$ unless otherwise specified.
The updated resource estimate incorporated the results of two additional wells since the previous estimate in July 2023.
Arizaro Resource Estimate
Located in Salta province, northwest Argentina
Resources increased 24% to 4.12 Mt LCE
The average grade increased 2% to 323 mg/L, implying potential for lower OPEX
M&I resources account for 61% of total resources (previously 52%), implying increased confidence
Resource Area
Another resource update is expected upon the availability of results from the area surrounding well ARDDH-08
In January 2024, LITH secured access to Block IV (8,445 hectares), a strategically located concession 18 km from the Arizaro project. Based on the results of prior sampling/trenching/geophysical surveys, management believes this concession offers resource expansion potential.
Block IV
LITH has made an initial payment of US$5.74M, with an additional US$11M required to secure a 100% interest
2023 PEA Highlights
Source: Company
Sensitivity Analysis
Source: Company
The 2023 PEA had returned an AT-NPV8% of US$415M, and an AT-IRR of 15%, using US$15k/t LCE vs the current spot price of US$15.4k/t
As with all large projects, the NPV and IRR are highly sensitive to LCE prices
Other Projects
Source: Company
In March 2024, LITH entered into a farm-in agreement with ERAMET, wherein ERAMET can acquire a 70% interest in its four Chilean properties by spending US$20M on exploration
LITH plans to spin out these projects into two new publicly listed entities:
Lithium Projects: 12 properties, spanning 111,978 hectares, will be transferred to Lithium Chile 2.0 Inc. Shareholders will get one share of this new entity for every four shares of LITH.
Gold Projects: Five properties, spanning 22,629 hectares, will be transferred to Kairos Gold Inc. Shareholders will get one share of this new entity for every 10 shares of LITH.
We support this plan as it allows LITH to monetize these assets, while streamlining its corporate structure for potential M&A related to the Arizaro project
Strong balance sheet
In-the-money options can bring in $8.34M
Our DCF valuation increased from $1.55 to $1.75/share, driven by higher resources, and a corresponding increase in mine life from 19 to 25 years
LITH is trading at $67/t (previously $59/t) vs the sector average of $83/t (previously $100/t)
By applying $83/t to Arizaro’s resources, we arrived at a revised comparables valuation of $0.96/share (previously $0.89/share
Pre-resource lithium juniors are trading at $320/ha (previously $433/ha)
By applying $320/ha to LITH's Chilean properties, we arrived at a revised valuation of $0.14/share (previously $0.19/share
Under the proposed spin-out terms mentioned above, we believe management values these assets at $0.30/share
Using a sum-of-parts model, we arrived at a revised fair value estimate of $1.57 (previously $1.55/share)
Valuation increased due to higher resources, partially offset by the impact of lower sector valuations
We are reiterating our BUY rating, and adjusting our fair value estimate from $1.55 to $1.57/share. We believe the company's M&A prospects have improved significantly due to the significant increase in resources, and the upcoming PFS.
We believe the company is exposed to the following key risks (not exhaustive):
Maintaining our risk rating of 5 (Highly Speculative
