Pure-play lithium developer Frontier Lithium Inc. (FL:TSX.V; LITOF:OTCQX; HL2:FRA) recently announced results from its ongoing Phase XII drill program that commenced in May 2022.
The firm's 100%-owned PAK Lithium Project contains two delineated premium spodumene-bearing lithium deposits known as the Spark and the PAK deposits. The company stated that through September 11, 2022, it has drilled a total of 11,150 meters (m) across 34 holes during its Phase XII delineation and infill drilling program and indicated that the data it just released pertains to results from four holes drilled at Spark.
Canaccord Genuity Corp. (Canada) Analyst Katie Lachapelle, CPA, commented, "We continue to be impressed by the positive results from the Phase XII drill program."
The firm said that these four additional drill holes targeting the Spark Deposit were designed to "convert inferred material to the indicated category for the planned open pit."
Frontier highlighted that Hole DDH PL-065-22 intersected 171.5m of pegmatite averaging 1.57% lithium oxide (Li2O), and Hole PL-062-22 returned 19.2m of 2.88% Li2O, 2.23% cesium oxide (Cs2O) and 513 ppm (parts per million) tantalum pentoxide (Ta2O5).
The firm indicated that Hole DDH PL-067-22, which was drilled with the goal of converting inferred material at depth, intercepted 326.6m of pegmatite averaging 1.92% Li2O, including a section of 50m averaging 2.98% Li2O.
Two other holes, DDH PL-069-22 and DDH PL-072-22, intersected 275.3m of pegmatite, averaging 1.74% Li2O, and 124.1m of pegmatite, averaging 1.55% Li2O, respectively.
The company's V.P. of Exploration Garth Drever remarked, "After tripling the meters drilled since the Resource update in March 2021 and targeting the Inferred, it is safe to say that the model remains robust and there will be substantial new Inferred."
Drever noted that "the Spark deposit remains open in all directions with predictable grades and widths" and added that he is "extremely pleased with the drilling results to date."
Lachappel commented, "The consistency of Frontier's high-grade hits leads us to believe that there is a strong likelihood that the company will report an indicated resource with a higher overall grade. We also expect the updated mineral resource to include new inferred material, with drilling indicating that the Spark deposit is still open in all directions."
In an October 11, 2022 research note, Canaccord Genuity Corp. (Canada) Analyst Katie Lachapelle, CPA, commented, "We continue to be impressed by the positive results from the Phase XII drill program, which continue to demonstrate grades well above the current mineral resource estimate (1.38% Li2O)."
The analyst emphasized this is evidenced by these latest results, which all returned significant widths averaging 1.55%, 1.57%, 1.74%, and 1.92% Li2O.
The report mentioned that the PAK Lithium Project encompasses nearly 27,000 ha (hectares) and "contains North America's highest grade lithium resource that is top three in size on the continent and is considered premium quality globally as a result of its rare low-iron spodumene." The PAK Project hosts a Measured and Indicated resource of 21.64 Mt (million tonnes) averaging 1.56% Li2O and an Inferred resource of 20.87 Mt averaging 1.42% Li2O.
As outlined in an N-43-101 compliant technical report issued on April 5, 2021, the plans for the Pak Project include "a fully integrated lithium operation from the resource to achieve downstream conversion plan for [the] production of battery-quality lithium salts." The report estimated that the property had an after-tax net present value (NPV) of US$974M (million) with an internal rate of return (IRR) of 21%.
In addition, two other spodumene-bearing discoveries have been made within the confines of the PAK property, including the Bolt pegmatite and Pennock pegmatite areas.
The Catalyst
Frontier Lithium advised in its most recent news release that it is currently utilizing a phased approach to preparing a Preliminary Feasibility Study (PFS), which should be ready in Q1/23. The company indicated that during Phase 1, it will focus on mine advancement and mill development with the objective of producing premium-grade spodumene concentrates.
Canaccord presently maintains a "Speculative Buy" rating and a CA$4.75 per share target price for Frontier Lithium Inc. This target price is a 114.932% increase from the current price of CA$2.21.
During Phase 2, the firm said it will concentrate its efforts on raising mine and mill production volumes in order to supply its downstream refinery with materials needed to produce lithium chemicals intended for use in the energy storage and electric vehicle (EV) battery market.
The completion and delivery of the PFS may prove to be a positive catalyst going forward. In the October 11, 2022 research note, Canaccord Analyst Lachapelle stated that strong existing and future demand for concentrate provides a solid basis for a phased approach to development.
Lachappel commented, "The consistency of Frontier's high-grade hits leads us to believe that there is a strong likelihood that the company will report an indicated resource with a higher overall grade. We also expect the updated mineral resource to include new inferred material, with drilling indicating that the Spark deposit is still open in all directions."
Lachapelle noted that "Frontier Lithium currently trades at 0.48x NAV (net asset value), which we believe is an attractive discount to peers at 0.64x NAV." Canaccord presently maintains a "Speculative Buy" rating and a CA$4.75 per share target price for Frontier Lithium Inc. This target price is a 114.932% increase from the current price of CA$2.21.
Resource Expansion Potential
Recent drill results show room for further resource growth at the company's Electric Avenue District property.
Frontier Lithium's V.P. of Exploration Garth Drever commented, "Our modeling beneath the central indicated resource appears solid, and drilling to the west continues to intersect significant pegmatite zones, and the Spark deposit remains open in all directions and zones of elevated tantalum and cesium along with lithium are being delineated."
Lachapelle pointed out that Canaccord's valuation for Frontier was predicated upon the extraction and processing of material produced by only a 23Mt resource, which is far below the firm's total current resource, which has grown to 42Mt grading 1.54% Li2O and "is among the largest in North America and highest grade."
Lachapelle continued, "Based on the consistency of infill drilling to date, we expect the majority of Frontier's existing mineral resource at Spark to be upgraded and included in the mine plan in the future, which could result in a mine life extension of ~14-18 years (18Mt currently included in our mine plan; 32Mt current resource, ~1Mtpa processing)."
Company Operations
Frontier Lithium is a lithium exploration and development company based in Sudbury, Ont., Canada. The company is focused on the development and production of battery-grade lithium hydroxide and lithium salts for the North American EV battery and energy storage markets. Its wholly owned PAK Lithium Project is located in the premier Electric Avenue lithium mining district in northwestern Ontario.
The PAK project includes the PAK Deposit, which has a Measured, Indicated, and Inferred resource of 9.3 MT averaging 2.06% Li2O, and the larger Spark Deposit, which is located just 2.3 km away from PAK and has an estimated Indicated resource of 14.4 MT averaging 1.40% Li2O and an Inferred resource of 18.1 MT averaging 1.37% Li2O.
The property hosts what is believed to be one of the highest-grade large-tonnage hard rock lithium resources in North America. The company's plans call for "a fully integrated operation from open pit mining through to chemical production (LiOH, 23kt per year)."
Share Structure, Ownership, and Coverage
Frontier Lithium has a diversified investor base. In aggregate, the firm's management, directors, and advisors own about 25% of the company's total outstanding shares. Institutional and private investors together account for about 20%, and the remaining 55% is owned by public shareholders.
The company has a market cap of CA$462.26 million with 213.02 million shares outstanding, and the firm's shares trade in a 52-week range between CA$0.88 and CA$3.89.
Currently, Frontier Lithium is covered by Analyst Katie Lachapelle of Canaccord Genuity and newsletter writers Christ Temple and Clive Maund. Please click "See More Live Data" in the data box above to view more coverage.
Frontier Lithium Inc.'s shares trade on the TSX Venture Exchange under the symbol "FL" and last closed for trading at CA$2.17/share on October 18, 2022. The company's shares are also listed in the U.S. on the OTCQX under the symbol "LITOF" and under the designation "HL2" on the Frankfort Stock Exchange in Germany.
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