Lithium Ionic Corp. (LTH:TSX.V; LTHCF:OTCQX; H3N:FSE) caught the attention of Cormark Securities which launched research coverage on it with a Buy rating and a CA$3.50 target price, Analyst Shannon Gill reported in a Dec. 4 initiation note. The return to target from the current share price, CA$0.85, is 312%.
"Cormark's detailed report from Jan. 25, 2024 outlined the developer opportunities in Brazil's Lithium Valley and flagged Lithium Ionic as the most advanced developer in the region, with an excellent technical team on the ground, extensive and prospective land package, and premium deposit locations," Gill wrote.
Snapshot of Projects
The analyst reviewed the highlights of the Lithium Ionic story.
The Canada-based company owns three projects, flagship Bandeira, Salinas and Itinga, and a 17,000 hectare land package in the highly prospective lithium district, Brazil's Lithium Valley in Minas Gerais state. The Lithium Valley is now the fifth largest contributor to the global lithium supply chain.
The hardrock lithium developer is advancing Bandeira, targeting the start of construction in 2025 and first production in late 2026.
"Lithium Ionic is poised to become a significant contributor to the region's output, with a catalyst-rich year ahead," wrote Gill. Only two lithium producers are now in the area, Sigma Lithium Corp. (SGML:TSXV; SGML:US) with its Grota do Cirilo operation and Companhia Brasileira de Litio (CBL) with its Cachoeira underground mine, both adjacent to Bandeira.
Lithium Ionic's other projects, the Salinas and Itinga properties, "represent some of the highest quality junior-held spodumene plays in Brazil following Pilbara's premium acquisition of Latin Resources," wrote Gill. Pilbara Minerals Ltd. (PLS:ASX) acquired Lithium Ionic neighbor, Latin Resources Limited, and its Colina deposit (adjacent to Salinas) in August for US$369 million (US$369M), at a 67% premium.
Recent Work at Flagship Project
Most recently, in October 2024, engineering, procurement and construction management services were started at Bandeira. Further mine and process optimization are anticipated as the project moves toward the detailed engineering phase. Right now, Bandeira is in the last stage of assessment for a Concomitant Environmental and Installation License (LAC) environmental permit, which the company expects to receive by year-end 2024.
A feasibility study (FS), completed in July 2024, "establishes Bandeira as one of Brazil's next low-cost lithium mines," Gill pointed out. The FS was based on a 17,200,000 ton (17.2 Mt) reserve at 1.15% lithium oxide (Li2O) and a November 2023 drill result cutoff date. The study outlines capex at US$233M and cash costs, including opex and transportation, at US$557 per ton (US$557/ton) of spodumene concentrate (SC5.5).
As far as economics, the base case scenario in the FS outlined a net present value discounted at 8% of US$864M and an internal rate of return of 32.5%, using a long-term spodumene concentrate price of US$2,750/ton and an average life-of-mine price of US$1,822/ton.
Lithium Ionic has a power infrastructure contract in place with Brazil's largest electricity distributor Cemig to connect Bandeira to the grid. It also has local water use approval for the project.
Resource Expansion Likely
Gill noted that the existing Bandeira resource likely could be expanded with a subsequent update to include results of infill and expansion drilling done at the project since Q1/24. Lithium Ionic plans to finish an updated resource estimate in late 2024 or early 2025.
A Look at Finances, Funding
Gill discussed Lithium Ionic's cash on hand and current ways it might fund Bandeira's capex.
As of the end of Q3/24, Lithium Ionic had CA$28M in cash. According to Gill, this is enough to cover preliminary earthworks and regional infrastructure, including the planned Piauí River bridge and connection to the power grid, building of which is slated to start in 2025.
The company has a signed letter of interest (LOI) with the US Export-Import Bank (EXIM) for debt financing up to US$266M, the exact amount of project capex estimated in the FS. This financing is contingent upon Lithium Ionic's submission of the final application and EXIM's approval.
"While there is no guarantee the entire amount will be granted, the LOI represents a substantial source of future project funding and a vote of confidence for the viability of the project, likely incentivizing additional sources of funding from offtake, partnerships, and less-dilutive equity participation," Gill wrote.
Another possible funding source for Bandeira capex is a potential sale of Lithium Ionic's Salinas project. Given it is a likely extension of the adjacent deposit Colina, the new owner of Colina, Pilbara, might want to acquire Salinas.
Possible Share Price Boosters
Numerous events expected over the next 12 months could catalyze Lithium Ionic's stock, Gill noted and listed them. By the end of 2024, the company anticipates receiving the LAC permit for Bandeira, allowing it to start construction there.
Late this year or early next, Lithium Ionic is slated to publish resource updates for both Bandeira and Salinas, incorporating all drill results collected from both projects since the previous update.
"It is likely that a preliminary economic assessment study for the Salinas project will be delayed, allowing the company to focus on Bandeira project advancement through Q4/24 and 2025," wrote Gill.
Subsequently, engineering specifics for Bandeira should be announced, including processing flowsheet parameters, mining and processing costs. Clarity on Bandeira capex funding is anticipated around this time, too.
Savvy Team of Professionals
From executives to the geologists and engineers, Lithium Ionic's team members all are highly experienced, Gill wrote and highlighted a few.
CEO and Director Blake Hylands is a professional geoscientist with 10-plus years of experience in advanced and early-stage exploration. As the co-founder and former chairman of Troilus Gold Corp. (TLG:TSX; CHXMF:OTC; CM5R:FRA), he led the company's technical team to the discovery of 8,000,000-plus ounces of gold equivalent at the Troilus project in northern Quebec.
President and Director Helio Diniz' experience spans in the exploration and mining sector spans 40 years. His previously held positions include managing director, most recently of Brazil Potash Corp. and before that, Xstrata Plc (XTA:LSE) (now Glencore Plc) during discovery of the Araguaia deposit. He founded and developed several other companies, including Belo Sun Mining Corp. (BSX:TSX.V).
Mike Westendorf, vice president of technical services, is a professional engineer with 15 years of diversified experience in mining operations, capital projects, and engineering and corporate development. Before joining Lithium Ionic, he was director of operational excellence at Copper Mountain Mining Corp. (CMMC:TSX; CPPMF:OTC.MKTS) (now HudBay Minerals Inc.).
Ownership, Share Structure
Lithium Ionic's management, directors and insiders own about 20% of the company's 158.6 million basic shares outstanding.
Its market cap is CA$134.8M. Its 52-week share price range is CA$0.41–1.78.
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