Neo Lithium is Canaccord's top pick among lithium developers; lifts target price

Broker Canaccord Genuity has hiked its price target on Neo Lithium Corp (CVE:NLC) (OTCQX:NTTHF) (FRA:NE2) to C$4.20 from C$3.40 previously following news the company had improved the purity of the battery-grade lithium carbonate produced at its pilot plant.

The company, which is advancing its 3Q project in Argentina, said on Tuesday that the carbonate now met worldwide premium specifications and was very close to electric vehicle (EV) battery giant and its 8% shareholder Contemporary Amperex Technology Co Ltd’s (CATL) high standards.

READ: Neo Lithium produces improved battery-grade lithium carbonate from its pilot plant

“Our target price is now based on 1.0x NAV, measured as at January 1, 2022. We have increased our multiple (from 0.8x) to reflect current trading ranges as well as the improved likelihood that NLC produces battery grade lithium carbonate that is in line with CATL’s product quality specifications. We believe this will have positive implications for ongoing project financing discussions,” noted Canaccord analyst Katie Lachapelle.

The firm is on track to deliver a definitive feasibility study this year, she added, which should “better position the company to advance financing discussions with strategic investor CATL and move the project towards a final investment decision”.

An improved processing method, first announced in March last year, has now led to the uplift of purity to 99.797% from 99.599%, Neo Lithium noted yesterday.

Lachapelle said that this improved process is expected to decrease both operating and capital costs, while minimizing reagent, water and power consumption.

“Neo Lithium continues to trade below peers at 0.89x NAV, versus peers at 1.0x. We expect NLC’s shares to re-rate over 2021, with a number of potential de-risking catalysts on deck, including the receipt of final construction permits (imminent), completion of a DFS (Q3 2021), and a potential partnership/financing agreement (discussions ongoing),” the analyst said.

Canaccord rates the stock a ‘Speculative Buy’.

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