In an April 8 research note, analyst Eric Zaunscherb reported that Canaccord Genuity raised its target price on Lithium Americas Corp. (LAC:TSX; LHMAF:OTCQX) to CA$12 from CA$11 per share to reflect the potential near-term upside from its Nevada project.
Production of lithium carbonate at Lithium Americas' primary asset, its interest in the Cauchari-Olaroz project in Jujuy, Argentina, is slated to start in 2020, be ramped up to 25 thousand tons per annum and ultimately, expanded to 50 thousand tons per year. Lithium Americas' partner in the fully funded project is the Sociedad Quimica y Minera de Chile S.A., the operator. Lithium Americas' "secondary asset should be gaining prominence as the market awaits first cash flow at Cauchari-Olaroz," Zaunscherb noted.
That secondary holding is Lithium Nevada, or the "amuse-bouche" to Cauchari-Olaroz, and it "drives our increased target price," explained Zaunscherb. "We believe that this project has scale and the potential to deliver several potentially impactful valuation catalysts while the market anticipates the main course."
Those catalysts include drill results from the 2018 program aimed at testing "the exploration upside uncovered in 2017" and a prefeasibility study in mid-2018. "Test work demonstrates the potential of a conceptual flowsheet employing acid leaching, purification and crystallization processes," the analyst added.
A recently released resource estimate at the project, for zone 1, now called the Thacker Pass lithium deposit, features "a consistent grade of 0.29% lithium (2,900 parts per meter) but a significant boost in mass and contained lithium carbonate equivalent," Zaunscherb indicated. Since the previous estimate in 2016, the Measured and Indicated resource of lithium carbonate equivalent increased 80% and the Inferred resource for the same grew 18%.
Lithium Americas is rated Speculative Buy and is trading at about CA$7.02 per share, which, Zaunscherb pointed out, is at a significant discount to the development companies under Canaccord Genuity's coverage.
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Disclosures from Canaccord Genuity, Lithium Americas Corp., Raising Target Price, Apr. 8, 2018
Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Required Company-Specific Disclosures (as of date of this publication)
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Lithium Americas Corp. in the next three months.
An analyst has visited the material operations of Lithium Americas Corp. Partial payment was received for the related travel costs.
Disclosures are available here.
