Century Lithium Corp. (TSX-V:LCE, OTCQX:CYDVF) offers investors exposure to an advanced development project adjacent to the only operating producer of lithium chemicals in the United States, according to analysts at PI Financial in their initial coverage of the stock.
In a note to clients, the analysts wrote that they were awarding the stock a ‘Buy’ rating and a C$3 price target. Century Lithium shares are currently trading at C$1.19.
“We derive our C$3 target using a sum-of-parts valuation, applying a 0.5x multiple on our DCF14% model for Clayton Valley, with corporate adjustments carried at par,” they wrote. “Our target implies a 0.51x adj. P/ NAV multiple.”
The analysts highlighted that they see Century Lithium moving ahead to permitting at its Clayton Valley lithium claystone project, located in Nevada, later this year, with a modelled start of production in 2028E.
They also noted that the company's existing pilot plant operations have served to de-risk and inform future operating plans.
“We model Clayton Valley with conservative estimates for operating and capital costs and note that even at our long-term assumption of US$25,000 per ton lithium carbonate equivalent (LCE) the project delivers healthy margins and may justify a larger project scope,” they wrote.
“Higher sustained lithium prices combined with a relatively simple operating plan could see the company pursue an expanded operating plan if sufficient water rights can be obtained, which would be accretive to our modeled valuation.”
Contact the author at emily.jarvie@proactiveinvestors.com
Follow her on Twitter @emilyjjarvie