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Dundee Capital Market’s coverage of Lithium America’s suggests the potential for the company to be one of the lowest costs lithium carbonate producers in the world.
On Monday, Lithium Americas (TSX:LAC) received a bullish initiating coverage report from equity research firm Dundee Capital Markets, as the lithium explorer was noted for having the potential to be one of the lowest cost lithium carbonate producers in the world. Earlier in March, the company assured investors that it did not expect new environmental permitting reviews by the provincial government in Argentina to impede final mining permits on current developments.
Dundee has initiated analyst coverage of Lithium Americas with a “buy” rating, and a 12-month price target of $3.15, which would imply a 100 percent premium to the company’s current trading price. The news of this coverage brings the number of firms with research on Lithium Americas up to five, with price targets varying between $3.15 to a high of $4.50, which would imply a significant premium at triple the company’s current market valuation.
Lithium Americas boasts indicated and inferred brine resources of over 8 million tonnes of lithium carbonate equivalent, covering 82,498 hectares of two adjacent Argentinean salars. The Cauchari and Olaroz salars host the third largest brine lithium resource in the world after top lithium producer Sociedad Quimica y Minera de Chile S.A., or SQM’s (NYSE: SQM) Atacama brine in Chile and the Bolivian state-owned Uyuni brine. In addition, exploration upside from the project is abundant, as the company has claims in Argentina that could account for an additional 1.5 million tonnes of lithium carbonate.
Investors will note that in addition to ample resources, the company is aligned with strategic partners Magna International (TSX: MG) and Mitsubishi Motors (TYO:7211), two diversified global automotive industry companies, which own 17 percent of Lithium Americas. The two partners have off-take option agreements in place for up to 37.5 percent of the company’s production in exchange for financing up to 37.5 percent of the capital costs via interest-free loans. Despite these locked in agreements, Lithium Americas is still able to sell its lithium resource to others, retaining exclusive interest in its project.
Mitsubishi has been demonstrating its preeminent commitment to the development of electric vehicle (EV) manufacturing and marketing initiatives within the United States as recently as last week, with the company launching a series of EV-related advancements in Hawaii, which include: service training; supporting emerging businesses and business models related to EV development and workforce deployment helping create job opportunities in the area of green technologies.
Project economics
In a recent pre-feasibility study by Lithium Americas, the property was estimated to have an after-tax net present value of $715 million, with cash operating costs estimated at $1,434 per tonne, excluding additional credits. It might also be noted that by products including potash and boron should help decrease costs, further improving project economics. In an exclusive interview with Lithium Investing News, Daniela Desormeaux, General Manager of SignumBOX, indicated that current lithium prices are in the range of $4,500 to $5,500 per tonne.
Although initial production is not anticipated until late 2014, the company has reported approximately $26 million of cash on hand and no debt as of the end of February, which should provide funding through to the definitive feasibility stage of the project expected early next year.
Battery manufacturing developments
Electrovaya Inc.(TSX:EFL) has recently announced that it has signed a deal with Chrysler to provide lithium ion batteries for Town and Country minivans that will be used as demonstration models in the United States. Although the financial terms of the agreement were not disclosed, the company said it will supply batteries for 25 minivans that will be part of a demonstration fleet of hybrid vehicles for presentation to municipalities, state governments, universities and energy companies.
Electrovaya designs, develops and manufactures advanced battery and battery systems for the transportation, electric grid stationary storage and mobile computing end-markets. The company’s segmented revenue streams include electric vehicles, whereby it develops power-system designs for clean transportation applications; stationary storage for energy grid systems, telecommunications and new green energy solutions, such as solar and wind; mobile computing, consisting of proprietary Lithium Ion SuperPolymer rechargeable batteries for the notebook and tablet market, and other specialty applications, including aerospace and defense, which require power solutions.
Initially, the market responded very positively to the news sending the share price up almost 19 percent at $1.99 before trading down to its current range of $1.85.
