Source: Greg Jones 08/19/2024

BMO Capital Markets analyst Greg Jones, in a research report published on August 14, 2024, provided an update on Lithium Ionic Corp. (OTC:LTHCF) following Pilbara Minerals' announcement of its intention to acquire Latin Resources (OTC:LRSRF). The analyst maintained an Outperform(S) rating and a target price of CA$2.00 on Lithium Ionic's stock.

Pilbara Minerals announced plans to acquire Latin Resources in an all-share transaction valued at approximately US$370 million, representing a 32% premium to LRS's 30-day VWAP. Jones noted, "Based on Latin's resources of 77.7Mt at 1.24% Li20, the consideration implies an EV/resource multiple of ~US$150/t LCE, which is generally in line with multiples paid in other recent lithium developer transactions."

The analyst sees this development as potentially positive for Lithium Ionic, stating, "We highlighted in our recent note that LTH is currently trading at a discount vs. its hard rock developer peers on an EV/resource basis (~US$10/t LCE vs. peer median of US$24/t LCE), and that a re-rating towards the peer median could provide ~50% share price uplift."

Jones emphasized the similarities between Lithium Ionic's and Latin Resources' projects, noting, "LTH has defined resources of 60.1Mt at 1.28% Li2O, expects to receive its permits to begin construction at Bandeira imminently, and to deliver a PEA on its Salinas project, which is directly adjacent to the LRS project, later this year."

The analyst believes that Pilbara's entry into the Brazilian lithium market could be beneficial for Lithium Ionic. "With an established lithium producer entering the region and providing a tangible value benchmark for a neighbouring project, we expect LTH shares will react positively on the back of this news" Jones stated.

Lithium Ionic's strategic focus includes advancing its Bandeira project towards production and developing the Salinas project. The company is well-positioned in Brazil's emerging lithium region, which Pilbara cited as part of its rationale for acquiring Latin Resources.

BMO Capital Markets' valuation methodology for Lithium Ionic remains unchanged from their previous report, based on a combination of NAV multiple and an in-situ value for resources.

With an Outperform rating and a target price of CA$2.00, representing a potential total return of 285% from the price at the time of the report of CA$0.52, BMO Capital Markets continues to see significant upside potential for Lithium Ionic.

Jones concluded that the Pilbara-Latin Resources transaction "could be such a catalyst" for the re-rating of Lithium Ionic shares that he previously highlighted as a possibility.

Important Disclosures:

Lithium Ionic Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
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Disclosures for BMO Capital Markets, Lithium Ionic Corp., August 14, 2024

Analyst's Certification I, Greg Jones, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Company Specific Disclosures Disclosure 2: BMO Capital Markets has provided investment banking services for remuneration with respect to Lithium Ionic Corp. within the past 12 months. Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from Lithium Ionic Corp. within the past 12 months. Disclosure 6A: Lithium Ionic Corp. is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services Disclosure 8A: BMO Capital Markets or affiliates have beneficial ownership of 1% or more of any class of the equity securities of Lithium Ionic Corp. (a) as of the end of the month prior to the issuance date of the research report, or (b) as of the end of the second most recent month if the report issuance date is less than 10 days after the end of the prior month.

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