VSA Morning Miner
American Lithium (CVE:LI)
American Lithium (CVE:LI) has announced the acquisition of 3,886ha claim in additional continuous acreage to the Tonopah Lithium Claims project in Nevada known as the Crescent Dunes Project. To the north, LI’s resource is limited only by the current license boundary and so this acquisition is a logical extension to the claims package and will enable LI to further expand its resources. What is encouraging is that surface sampling has yielded more than 2,000ppm Li. As part of the upcoming drilling campaigns, LI will be seeking to identify higher grade zones within what is one of the largest resources in the world currently. Given the scale of the project we expect that such high grading could give the company a robust mine life on relatively stronger economics.
Given the contiguous nature of the licenses, the ore is very similar to that of the current TLC property and exhibits the same weak bonds between the lithium and claystone structure which is what lends the deposit to the high, rapid recoveries that have been announced over the past few years. This understanding is based on a robust dataset acquired in the transaction for which the vendors will receive 2.5mn shares in LI and we highlight that there are no royalties on the property. Multiple trenches have been dug with 56 samples collected along with 84 auger samples. This baselevel work is useful for the company as it derisks the transaction and demonstrates that there clearly is additional mineralisation that can be added into the resource inventory for the project. LI’s own work will likely commence during Autumn 2021.
LI shares have continued to perform strongly, up 60% since our June note and while support from improving lithium sentiment has certainly been a major factor tailwinds from the uranium space may well be providing additional fuel to the rally with the spot price having jumped to US$40/lb. LI acquired a large uranium project through its earlier acquisition of the Peru assets in 2021, although the focus is currently the lithium projects we highlighted the attractive metrics of the Macusani uranium project from its PEA. With unit costs of US$17/lb, upfront capex of US$300m and a likely incentive price of US$45/lb the project stands up well against global peers (most of which need at least US$60/lb to work). LI plans to update the PEA work to position the project to give the company maximum flexibility to develop it or sell it depending on which will likely offer shareholders the strongest return.
We reiterate our Buy recommendation and C$6.95/sh. target price.
Oliver O'Donnell, CFA, Head of Research & Natural Resources Analyst | T: +44 (0)20 3617 5180 | E: oodonnell@vsacapital.com
Paul Renken, Senior Geologist | T: +44 (0)20 3005 5011 | E: prenken@vsacapital.com
VSA Capital Research | T: +44 (0)20 3005 5000 | E: research@vsacapital.com
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