In a Sept. 6 research note, Canaccord Genuity analyst Eric Zaunscherb reported that Neo Lithium Corp. (NLC:TSX.V) finished a hydrological model, an initial production well and an environmental baseline study, all part of the feasibility study work on its Tres Quebradas project in Argentina.
Zaunscherb reviewed each of the three developments. As for the hydrological model, it showed that the planned mineral extraction methods would have zero to minimal environment impact for several decades on the Tres Quebradas and Laguna Verde lakes just south of the project. To arrive at this conclusion, data from two drilling seasons and from 11 long-duration pumping tests across the salar were incorporated into the model. It will serve as the foundation of a reserve estimate.
"The completion of the hydrological model is an important step in progressing the production model and assessing any of the project's potential environmental impacts," Zaunscherb noted.
Regarding the initial well, its production rate, using a high-grade cutoff, is equal to about 20% of the total production needs of the project, meaning it would likely require few wells. The 12-inch-wide, steel filter well that descended 100 meters yielded 90 liters of high-grade lithium brine. The grade cutoff was 800 milligrams per liter lithium whereas the cutoff for the Measured and Indicated resource was 614 milligrams per liter. Further, these results were consistent with those of the hydrological model.
Zaunscherb wrote that Neo Lithium will keep building production wells in the northern, high-grade zone to "define production capacity, test the aquifer and carry on production level pump tests."
With respect to the environmental baseline study, it will be forwarded to the provincial authorities. Of note, the study found that no significant nesting grounds are located within the proposed mining and operations area. In other related news, Neo Lithium's environmental exploration and development permit has been renewed for two years.
The company has sufficient cash, $49 million, to take it through the feasibility stage. To get it from feasibility through development, it is currently considering the various financing options "with the goal of securing a joint venture partner by year-end," Zaunscherb explained.
He reiterated Canaccord Genuity's Speculative Buy rating and CA$2 per share target price on Neo Lithium, whose current stock price is around CA$1.04 per share.
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Disclosures from Canaccord Genuity, Neo Lithium Corp., Flash Update, September 6, 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):
Neo Lithium Corp. currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to Neo Lithium Corp.
In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from Neo Lithium Corp.
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Neo Lithium Corp. in the next three months.
An analyst has visited the material operations of Neo Lithium Corp. Partial payment was received for the related travel costs.
Disclosures are available here.
