Lithium Co. Receives Approval for Final Exploration Reports

Source: Katie Lachapelle 09/11/2024

Lithium Ionic Corp. LTHCF recently reported it had received approval for the Final Exploration Reports for its Bandeira and Outro Lado lithium properties, according to a Canaccord Genuity research note.

Canaccord Genuity analyst Katie Lachapelle, in a research report published on September 10, 2024, provided an update on Lithium Ionic Corp. following the company's announcement of receiving approval for the Final Exploration Reports for its Bandeira and Outro Lado lithium properties. The analyst maintained a Speculative Buy rating and a target price of CA$2.50 on the stock.

Lachapelle highlighted the significance of this permitting milestone, stating, "With the Final Exploration Report permits in hand, LTH has proceeded to submit its Mining Concession application along with the Economic Viability Study for the Bandeira property." She added, "From a regulatory perspective, the next major hurdle — and a key catalyst, in our view — will be the approval of the Licença Ambiental Concomitante (LAC) for the Bandeira Lithium Project."

The analyst noted that Lithium Ionic's management anticipates LAC approval "in the next few months," which is needed before construction can begin and acts as a prerequisite for the final granting of the Mining Concession.

Regarding the company's financial position, Lachapelle commented on recent transactions, including a CA$16 million private placement and a US$20 million royalty agreement. "After the close of these transactions, we estimate a cash balance of ~CA$35 million," she noted. However, the analyst pointed out that additional funding will be needed to fully finance the project's estimated US$266 million initial capital cost.

Lithium Ionic's strategic focus includes advancing the Bandeira project towards production, targeted for 2026, though Canaccord maintains a 2027 forecast. The company is also progressing its earlier-stage Salinas project.

Lachapelle highlighted potential upcoming catalysts, including "Approval of Bandeira LAC/construction permit, Potential strategic partnership, offtake agreement and/or M&A, Completion of Salinas PEA – H2 2024, Salinas resource update – Q4 2024 (30,000m program underway), Completion of Salinas EIA – Q1 2025."

Canaccord Genuity's valuation methodology for Lithium Ionic is based on a NAV multiple. "Our target price remains based on 1.0x NAV, now measured as of October 1, 2025," Lachapelle explained.

With a Speculative Buy rating and a target price of CA$2.50, representing a potential return of approximately 303% from the price at the time of the report of CA$0.62, Canaccord Genuity sees significant upside potential for Lithium Ionic.

Lachapelle concluded, "We have updated our estimates for LTH's latest financials. As a result, our NAVPS is largely unchanged (0.5% ∆), and we maintain our CA$2.50/sh target price and SPEC BUY rating."

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3. Disclosures for Canaccord Genuity, Lithium Ionic Corp., September 10, 2024

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Sector Coverage Individuals identified as "Sector Coverage" cover a subject company's industry in the identified jurisdiction, but are not authoring analysts of the report. Investment Recommendation Date and time of first dissemination: September 10, 2024, 09:16 ET Date and time of production: September 10, 2024, 09:16 ET Target Price / Valuation Methodology: Lithium Ionic Corp. - LTH Our target price is based on 1.0x NAV, measured as at October 1, 2025. Risks to achieving Target Price / Valuation: Lithium Ionic Corp. - LTH Exploration risk Exploration is subject to a number of risks and can require a high rate of capital expenditure. Risks can also be associated with the conversion of inferred resources and lack of accuracy in the interpretation of geochemical, geophysical, drilling and other data. No assurances can be given that exploration will delineate mineral resources or that the company will be able to convert mineral resources into minable reserves. Financing risk As an exploration and development company with no operating cash flow, Lithium Ionic is reliant upon the capital markets to fund the development of its assets and the continuing business development activities. There is no guarantee that LTH will continue to be able to access capital markets should there be changes in market sentiment and/or pricing. Permitting risk Our estimates and valuation assume the successful receipt of permits for the company's projects; however, there is no guarantee that this will be the case, or that permits will be received within our assumed timelines. Operating risk If and when in production, the company will be subject to risks such as plant and equipment breakdowns, metallurgical (meeting design recoveries), materials handling and other technical issues. An increase in operating costs could reduce the profitability and free cash generation from the operating assets considerably and negatively impact valuation. Furthermore, the actual characteristics of an ore deposit may differ significantly from initial interpretations, which can also materially impact forecast production from original expectations. Jurisdictional risk Investments in emerging markets such as Brazil pose a greater degree of risk as they are more susceptible to destabilization. As a result, Lithium Ionic's operations could be adversely impacted by political and economic instability and/or changes in government policy that could affect the ownership of assets, mining activities, exchange rates, and taxation, among others. Given the heightened jurisdictional risk and technical risk (pre-resource), we assume an elevated discount rate to value Itinga vs. the typical 8% used to value operating lithium assets in safe jurisdictions. Commodity price and currency fluctuations As with any mining company, LTH is directly exposed to commodity price and currency fluctuations. Commodity price fluctuations are driven by many macroeconomic forces, including inflationary pressures, interest rates and supply and demand factors. These factors could reduce the profitability, costing and prospective outlook for the business.

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