Small-Cap Lithium Co. Has Potential Global Reach

You may not have heard of this small-cap exploration and development stock, but Atlas Lithium Corp. (ATLX:NASDAQ) is looking to make its mark on the critical battery metal's worldwide market this year as it gets its new plant constructed and online in Brazil's Lithium Valley.

Atlas is the only Brazilian lithium company with pre-ordained buyers waiting for its product, the company said, after it signed binding agreements for US$50 million in funding to advance its Minas Gerais lithium project toward production with two of the world's largest lithium hydroxide producers. It's also using modular components to speed up the plant's construction.

"Concurrent with the offtake announcement, management laid out the development timeline for the project targeting initial spodumene concentrate production under Phase 1 by 4Q24, which is a full year ahead of our prior estimate of 4Q25," noted Alliance Global Partners analyst Jake Sekelsky, who rated the stock a Buy, in an updated research note in December. "As a result, we are updating our model to reflect the company's new phased development approach and shorter development timeline to first production while lowering our lithium concentrate price deck to reflect current market conditions. As a result, we are reiterating our Buy rating and increasing our price target to (US)$75.00 from (US)$70.00 per share."

The company has secured agreements with Yahua, a lithium chemical supplier to Tesla; and Chengxin, a battery-grade lithium supplier to BYD, the largest electric vehicle (EV) maker globally.

The two Chinese companies have committed the US$50 million (US$10 million as equity at US$29.77 and US$40 million as non-dilutive offtake prepayment) in exchange for 80% of Atlas Lithium's Phase 1 lithium concentrate production. Goldman Sachs served as financial adviser for the transactions.

"Although we are a relatively small and lesser-known company, we are forming partnerships with a global footprint," Atlas Chairman and Chief Executive Officer Marc Fogassa said in an interview with Streetwise Reports. "It's not often that a company with our market capitalization accomplishes this."

The Catalyst: Battery Metal Revolution Transforming 'Lithium Valley'

Far from the salars of the more well-known Lithium Triangle in the Andes of Argentina, Bolivia, and Chile, Brazil's Jequitinhonha Valley is sparking interest as a resource for the element needed to help meet the world's emission-free goals.

It was long known for a history of hunger and was nicknamed "the Valley of Misery." But that's changing — a new nickname being heard is "Lithium Valley," wrote the North American Congress on Latin America.

"Jequitinhonha Valley sits on 85 percent of Brazil's known lithium deposits, which has sparked a race to invest and develop," the organization wrote. "In May, Minas Gerais governor Romeu Zema and Brazilian federal officials traveled to Nasdaq in New York to launch the 'Lithium Valley' project, looking for international investors for the lithium mining companies operating in the region."

Atlas said the lithium it will mine there is found in spodumene, a pegmatite rock known for its high lithium content, allowing for more efficient extraction. The method also uses significantly less water and better ESG outcomes.

Many companies have been extracting the metal from brine in the huge salars further south. But spodumene-based lithium extraction offers "lower capital costs and a shorter time from discovery to production in comparison to brine operations," noted Feeco International.

The Brazilian lithium is also highly sought after due to its low impurities and large crystal size, Atlas said.

"The company is targeting the use of renewable energy sources in its operations and will employ a 100% dry process with no tailings dams, minimizing its environmental footprint," Atlas noted. "Atlas Lithium also prioritizes the use of recycled water and will be utilizing a concentration process that does not involve hazardous chemicals or flotation."

Future Partnerships Possible, Analyst Says

The new plant is nearing completion. Its "compact, modular design … to expedite construction and reduce its footprint and weight compared to less optimal designs" will be built off-site before being reassembled in Brazil, according to the company.

The modular construction also will contribute to a low capital expenditure (CAPEX) to production of US$49.5 million, a fraction of what other companies in the sector are spending, the company said.

For Phase 1, the company expects to produce up to 150,000 tonnes per annum (Tpa) of battery-grade spodumene concentrate by the end of the year, with 120,000 Tpa going to the Chengxin and Yahua. The other 20%, like the increased capacity to 300,000 Tpa the company is aiming for by mid next year, remains uncommitted.

"Management expressed their view that the high quality of its plant and production process played an important role in Chengxin and Yahua becoming offtake buyers," noted analyst Heiko F. Ihle of H.C. Wainwright & Co. on Feb. 27 when he maintained his Buy rating on the stock with a price target of US$52 per share. "Looking ahead, this could also lead to more future partnerships if the company remains on schedule."

Opportunity More 'Electric Than Ever'

Battery storage will be "pivotal" in reducing carbon footprints globally, according to Energy5. 

"As the demand for clean energy continues to rise, it is crucial to invest in research, development, and implementation of battery storage technologies," the company wrote. "Embracing such innovative solutions will not only help combat climate change but also create a more resilient and sustainable energy infrastructure for generations to come."

A soft, silvery metal with highly reactive and flammable properties, lithium is also used to strengthen alloys, as a high-temperature lubricant, and as a drug to treat bipolar disorder.

The market for the metal is projected to grow from US$2.5 billion in 2023 to US$6.4 billion by 2028 at a compound annual growth rate (CAGR) of 20.4% from 2023 to 2028, according to a report by Markets and Markets.

"The market has observed stable growth throughout the study period and is expected to continue with the same trend during the forecast period," the report said.

Katusa Research predicted the lithium market could have a major breakout this year. It cited demand for use in electric vehicles and storage batteries as key drivers. 

"The opportunity in lithium is more electric than ever," Katusa wrote.

Analyst Joe Reagor of Roth Capital Partners LLC, while reiterating his Buy rating for the stock with a US$47 per share target price, wrote that even with conservative modeling, "We believe ATLX is well funded for the development of Phase 1 of the Neves Project in Brazil."

Ownership and Share Structure

About 40% of Atlas Lithium is owned by management and insiders, including about 35% by Fogassa. About 18% of the shareholders are institutional. The rest, about 42%, is retail.

Other top shareholders include Waratah Capital Advisors Ltd. with 6.13%, Invesco Capital Management LLC with 3.36%, Weiss Multi-Strategy Advisers LLC, with 2.57%, and Candace Shira Associates LLC with 2%.

Its market cap is about US$150 million. It trades in a 52-week range of US$45 and US$11.80.

Important Disclosures:

1. Atlas Lithium Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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