Engineering Milestone Secures Progress for Key Lithium Project in Brazil

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Lithium Ionic Corp. (LTH:TSX.V;  LTHCF:OTCQX;  H3N:FSE) has announced the initiation of Engineering, Procurement, and Construction Management (EPCM) services for its flagship Bandeira Lithium Project in Minas Gerais, Brazil. Globally recognized engineering firm Hatch Ltd. will lead engineering and design services. Reta Engenharia, a leading Brazilian construction management firm, will manage construction. This significant milestone signals the project's progression into the construction and development phase as Lithium Ionic moves closer to production.

Key Highlights from the company press release:

• Hatch Ltd. has been awarded engineering and design services. Hatch is an internationally recognized engineering firm with extensive global experience in several commodities and a local presence in Brazil, including offices in Belo Horizonte, the capital city of Minas Gerais state. Hatch's involvement will bring world-class expertise and innovative solutions to the Bandeira Project, ensuring a streamlined and efficient development process.
• Reta Engenharia, a leading Brazilian construction management company, has been selected to provide construction management services for the Bandeira Project. With extensive experience in greenfield mining projects, Reta has supported both junior and large-cap producers, making them ideally suited to drive efficient and effective project outcomes. Their proven track record in managing greenfield projects, combined with their deep regional knowledge, will be instrumental in advancing the Bandeira Project towards production.
• Growing the Owner's Team: To support this transition to project development and ensure a smooth transition into production, Lithium Ionic is expanding the technical capabilities of its owner's team by bringing in experienced professionals to guide the Bandeira Project through the construction and operational readiness phases.

In the company's news release, Blake Hylands, CEO of Lithium Ionic, noted the importance of this transition, "Our momentum towards production is stronger than ever as we kick off the engineering and construction management phase with our esteemed partners, Hatch and Reta."

The Bandeira Project is advancing through the permitting process at both state and federal levels, with key approvals expected soon. Initial production is scheduled to begin in the second half of 2026, following the approval of the Licença Ambiental Concomitante (LAC) and subsequent Mining Concession and Operating License.

Lithium Sector Gains Momentum Amid Growing Demand

Visual Capitalist reported on September 29 that despite the price drop, lithium-ion battery demand is projected to increase ninefold by 2040. This move is driven by the continued growth of the EV market and broader electrification trends.

Greg Jones of BMO Capital Markets described new drill results from the Bandeira project as continuing to "highlight the exploration potential at the property" and suggested that these results could present opportunities for optimization. 

This long-term growth trajectory supports the ongoing development of lithium projects like Lithium Ionic's Bandeira Project in Brazil, which aims to meet this increasing global demand.

As Forbes reported on October 8, lithium prices had fallen by nearly 90% since their peak in 2022.

This is attributed to an oversupply of the commodity and slower-than-expected electric vehicle (EV) sales. Despite these challenges, industry experts indicated that the sector was showing early signs of recovery.

Also, on October 8, Barry Dawes of Martin Place Securities highlighted that "the lithium market is showing strong signs of upturn" and suggested that lithium shortages are likely after 2027, reinforcing the long-term potential of the sector. His comments reflected a growing optimism for the post-2027 period. It is then that demand for lithium is expected to outstrip supply.

Lithium Ionic's Catalysts

Lithium Ionic's Bandeira Project is positioned as a critical development in Brazil's Lithium Valley. According to the company's investor presentation, this project is expected to deliver significant output. A Feasibility Study projects a 14-year mine life, producing 178,000 tonnes of spodumene concentrate annually. The post-tax net present value (NPV) is projected at US$1.3 billion with an internal rate of return (IRR) of 40%.

The company's strategic partnerships with Hatch and Reta, combined with the strong regional infrastructure in Minas Gerais, which includes renewable hydroelectric power and proximity to export markets, are expected to accelerate the development of the project. These factors are key drivers of Lithium Ionic's goal to become one of Brazil's major lithium producers, contributing to the growing global demand for lithium in the electric vehicle market.

Analysts on Lithium Ionic

Analysts have shown optimism about Lithium Ionic Corp., particularly regarding the potential of its Bandeira Lithium Project. Katie Lachapelle from Canaccord Genuity, in her September 10, 2024, research note, highlighted the company's progress in securing approvals for the Final Exploration Reports for the Bandeira and Outro Lado lithium properties.

Lachapelle emphasized that the next major catalyst would be the approval of the Licença Ambiental Concomitante (LAC), which is needed to begin construction at the Bandeira project. She maintained a Speculative Buy rating with a target price of CA$2.50, representing a potential upside of 303% from the price at the time of the report. Lachapelle also noted the company's CA$35 million cash balance following recent financing transactions but indicated that additional funds would be required to cover the estimated US$266 million in initial capital costs.

On October 8, 2024, Greg Jones of BMO Capital Markets provided further positive insights into Lithium Ionic's development. He described new drill results from the Bandeira project as continuing to "highlight the exploration potential at the property" and suggested that these results could present opportunities for optimization. Jones maintained an Outperform rating on the stock, with a target price of CA$1.25, reflecting a 40% potential return. He also emphasized that the company traded below the peer median, with its lithium carbonate equivalent valued at US$40 per ton, compared to US$60 for peers, marking it as undervalued. He further pointed out that Lithium Ionic was one of BMO's preferred lithium developers.

Ownership and Share Structure

According to the company, management and insiders own 20% of the Lithium Ionic. 

One of the insiders, President & Director Helio Diniz, owns 5.52%, Director Michael Lawrence Guy owns 5.10%, Director David Patrick Gower owns 2.56%, and Andre Rezende Gumaraes owns 2.52%, according to Reuters.

30% is held by institutional investors. Reuters reports Waratah Captial Advisors owns 7.01%, JGP Gestao de Recursos Ltda owns 2.69%, RBC Global Asset Management Inc owns 1.94%, Sprott Asset Management LP owns 1.55%, BMO Asset Management owns 1.30%, and IXIOS Asset Management SA owns 1.20%. The rest is retail.

Lithium Ionic has 158.58 million shares outstanding and 131.15 million free-float traded shares.

The company's market cap is CA$135 million, and it trades in a 52-week range of CA$0.41 - 2.24 per share.