Stifel GMP lifts target price on Neo Lithium after significant resource expansion at Argentina project

Stifel GMP has repeated a ‘Buy’ on Neo Lithium Corp (CVE:NLC) (OTCQX:NTTHF) (FRA:NE2) and lifted its target price after the company released an updated and expanded resource estimate for its flagship 3Q project in Argentina. 

On June 9, the company said the higher confidence measured and indicated (M&I) resource, at 1.682 million tonnes of lithium carbonate equivalent (LCE), has increased by 125% at the project’s high-grade zone, with an 800 milligram per litre (mg/l) lithium cut-off grade compared to 2018. 

READ: Neo Lithium welcomes updated resource for its flagship Argentina project, which underlines its scale and potential

In the medium-grade zone, with a 400 mg/l lithium cut-off, M&I resources were lifted 33% to stand at 5.304 million tonnes.

“The company highlighted that the higher grade resource could result in a reduction in the size of evaporation ponds required for the project, which in turn could decrease the capex requirements for the project,” said Stifel analysts in a note.

They also highlighted that around US$74 million, or 23% of the project’s capex (of US$319 million), directly related to pond construction (including first fill).

The definitive feasibility study (DFS) for the project continues to be on track for completion by the end of Q3, 2021, they added.

The broker repeated its project net asset value (NAV) assessment of C$4.60 per share, and increased its target price on the stock to C$4.10 per share (C$3.90 previously), which is derived by applying a 10% discount (15%) to its project NAV.

Shares in Neo Lithium closed on June 9 in Canada at C$3 each.

Stifel said the group’s 3Q project is expected to have one of the highest grade and lowest impurities of virtually all greenfield brine projects under development.

The company also benefits from having a high quality, high profile partner like CATL, which is one of the world’s largest EV battery manufacturers, it noted.

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