CleanTech Lithium PLC (AIM:CTL), the AIM-listed Chilean lithium brine developer, has attracted a 'speculative buy' recommendation and 22p target price from Fox-Davies Capital, implying significant upside from the current share price of 8p.
The broker argues the stock is deeply undervalued following two transformative milestones.
They are the agreement of a 40-year CEOL (Contrato Especial de Operación de Litio, a special lithium operating contract granting the exclusive right to extract, produce and sell lithium from a specific salt flat) with the Chilean government in March, and the publication of a pre-feasibility study confirming robust economics at the flagship Laguna Verde project.
The PFS, led by engineering group Worley, established an after-tax net present value of $959 million at an 8% discount rate, a post-tax internal rate of return of 21.2%, and a payback period of roughly four years from first production.
The study outlined a 15,000 tonnes per annum lithium carbonate operation over a 25-year mine life, with initial capital expenditure of $748 million and operating costs of $5,768 per tonne, placing the project in the lowest-cost quartile globally for direct lithium extraction (DLE, a technology that selectively captures lithium from brine without the need for traditional evaporation ponds).
CleanTech trades at roughly $6.9 per tonne of enterprise value to resource across its combined 2.82 million tonne lithium carbonate equivalent resource base, representing a 98% discount to the PFS net present value and a 75% discount to the peer median of $27.3 per tonne.
Fox-Davies views the announcement of a strategic partner as the single most important catalyst, with proposals sought by the end of June and finalisation targeted for the third quarter.
The broker expects strong interest given recent deal activity in the lithium sector, including Huayou's acquisition of Atlantic Lithium.
A planned dual listing on the ASX could provide a further liquidity-driven uplift to 24p, with the Australian market continuing to value Latin American brine projects at significantly higher multiples than London.
The CEOL awaits final administrative ratification by Chile's Comptroller General, expected in the second quarter. Fox-Davies rates this risk as low, noting the Comptroller cannot alter agreed terms and two prior CEOLs have been ratified without issue.
Key risks include the $748 million capital requirement for a company with a market capitalisation of just £15.8 million, convertible loan notes maturing in June 2026, and the fact that DLE technology at this specific scale and cost structure remains commercially unproven, though the commissioning of Eramet's Centenario project in Argentina provides a relevant precedent.
Even at 80% of the base case lithium price, the project retains an after-tax net present value of roughly $546 million, approximately 20 times the current market capitalisation.