Neo Lithium Corp (TSX-V:NLC) has had its target price lifted by broker Stifel GMP to reflect the latter's assumption that the lithium price will increase in the long term.
The company is advancing its wholly-owned 3Q project in Argentina and the broker has lifted its target on the stock to C$5.80 from C$4.10 previously, to reflect its long-term price assumption on lithium carbonate increasing to US$13,500 per tonne from US$12,000 per tonne.
"We have revised our long-term lithium carbonate price assumption to reflect the acceleration in global EV sales, which in turn reflects the introduction of tougher carbon emissions regulations and greater commitments being made by leading OEM's towards electrifying their fleets," said Stifel analysts.
The broker also noted that it expected Neo Lithium to soon release a definitive feasibility study (DFS) for the project but said it did not expect any "significant change" in the economics compared to the pre-feasibility study.
READ: Neo Lithium achieves 99.9% purity of battery-grade lithium carbonate at 3Q pilot plant
"Having said this, we do believe it is possible that in conjunction with the release of the DFS, NLC does announce a strategic partner as well as definitive financing for Phase 1 of the 3Q Project (20,000 tpy production)," analysts added.
"We anticipate that a strategic partner could purchase an equity interest in the project, which NLC would use to fund its equity commitment going forward. As a reminder, capx for Phase 1 is estimated to be US$319mm (100%)."
The 3Q asset is expected to have one of the highest grades and lowest impurities of virtually all lithium brine projects.
A pilot processing plant is operational and has been producing lithium carbonate with 99.891% purity, which is considered acceptable for the production of lithium iron phosphate (LFP) batteries.
Stifel GMP repeated a 'Buy' rating on the stock, which closed on Friday at C$4.55 a share.
Contact the author at giles@proactiveinvestors.com