VSA Morning Miner, 29/09/21
American Lithium (CVE:LI)
American Lithium (CVE:LI) has been carrying out work on its Macusani uranium project, in Peru, on the back of a positive meeting with President Castillo and the significant uptick in uranium pricing and sentiment. Based on the PEA published by the previous owners the project has amongst the most attractive economics of any undeveloped projects globally with incentive pricing close to spot pricing at US$45/lb unlike the majority of the peer group which require US$60/lb.
The company’s recent work at Macusani included prospecting, mapping and sampling results and permits for drilling have been filed with the relevant authorities. The results include the identification of three new anomalies which are drill ready and along with drill targets which would extend the known mineralisation. Grab samples average grades were 18,270ppm (2.15% U3O8) with the highest at 377,400ppm U (44.5% U3O8). The work programme covered 90 outcrop grab samples and 12,000 radiometric scintillometer station readings collected in a systematic approach across 100x100m grids tightened based when anomalous readings were encountered.
The initial results indicate the already impressive parameters of the project could be further enhanced from the original PEA which on US$50/lb pricing indicated an NPV8 of US$603m, IRR of 41% post tax. The project has amongst the lowest capital intensity and cash costs (US$17/lb) of all undeveloped projects and whilst lithium remains the core focus of the company given the fundamentals of the project and the strong backdrop in pricing it is the perfect opportunity to advance the project to sufficiently refresh and advance the PEA. This would put the company in a strong position to either progress development within American Lithium or realise value in the project.
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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