• Drilling at its flagship project (Rincon West in Salta province) has delineated a 5 km long x 3.3 km wide x 0.20 km thick mineralized aquifer.  All 12 holes of a maiden drill program (targeting two areas) intersected lithium over long intervals, with values ranging from 152 to 402 mg/L. 
  • We believe Rincon West has potential to host a high-tonnage, low- to medium-grade resource. Drilling to date shows potential for a continuous aquifer of concentrated lithium brines.
  • Drilling is ongoing, with plans to drill a third area before completing a maiden resource estimate, possibly within six months. The company is also planning electromagnetic surveys, followed by aggressive drilling at other projects.
  • Lithium prices are down 70% YoY to US$12k/t vs the five-year average of US$20k/t. That said, we maintain a positive outlook on lithium stocks as we believe lithium prices have stabilized, and battery/EV manufacturers/miners are actively seeking stable/long-term supply sources. 
  • Upcoming catalysts include drilling, a maiden resource estimate at Rincon West, and positive sentiment towards juniors focused on EV metals. 
  • LIT is trading below cash, with $52M in working capital vs the current MCAP of just $22M.

 

 

  YTD 12M
LIT -54% -34%
HLIT (ETF) -39% -56%
TSXV 5% -5%

*See important disclosures at the bottom of this report rating and risk definitions. All figures in C$ unless otherwise specified.

 

Portfolio Summary

Four early-stage lithium projects, covering over 67,000 hectares in Argentina

Argentina is the fourth largest lithium producer in the world, with the third largest reserve-base

Rincon West is adjacent to lithium projects owned by Rio Tinto (NYSE: RIO) and Argosy Minerals (ASX: AGY

Rincon West Project, Salta (50% wholly owned/50% under option)

A nine-hole maiden drill program at the first target, Villanoveno II, returned attractive lithium values, including 258 m of 287-402 mg/L. Additionally, preliminary results from an ongoing six-hole drill program at the second target, Rinconcita II, returned promising values from the first three holes.

Drilling has delineated a 5 km long x 3.3 km wide x 0.20 km thick mineralized aquifer 

All 12 holes of the maiden drill program intersected lithium brine over long intervals, with values ranging from 152 to 402 mg/L; we note that these grades are on the lower end of the typical 200 to 700 mg/L range for lithium juniors

We should be able to calculate a preliminary speculative resource estimate after the current drill program

 

Management is planning a six-hole drill program at the third target (Paso de Sico) before completing a maiden resource estimate. We note that delineating a lithium resource is typically faster and more cost-effective than for mainstream metals like gold and copper.

 

Upcoming Catalysts

Drilling at Rincon West, followed by a maiden resource estimate. Electromagnetic surveys at other projects, followed by drill programs 

Financials 

Strong balance sheet with $52M in working capital, including $49M pre-paid for up to 15,500 m of drilling

FRC Valuation 

As LIT’s projects are in pre-resource stages, we are continuing to value LIT based on the average EV/hectare of lithium juniors.

LIT’s negative enterprise value implies that the market is assigning zero value to its assets 

Early-stage lithium juniors are trading at $358/ha (previously $524/ha). Applying $358/ha,  we arrived at a fair value estimate of $0.40/share on LIT (previously $0.52/share)

We are reiterating our BUY rating, and adjusting our fair value estimate from $0.52 to $0.40/share. With Stellantis’s backing and a negative enterprise value, we believe LIT stands out as one of the most undervalued lithium juniors. We anticipate that as additional drilling results are released, the market will start to recognize the stock’s significant undervaluation.

 

Risks

The following risks, though not exhaustive, will cause our estimates to differ from actual results:

  • The value of the company is dependent on lithium prices
  • Exploration and development
  • Potential for share dilution
  • Permitting
  • None of its properties have a NI 43-101 compliant resource