Couloir Capital has repeated a 'Buy' on Cypress Development Corp (TSX-V:CYP, OTCQB:CYDVF) after the lithium-focused group successfully set up its pilot testing plant for its Clayton Valley project in Nevada and struck a purchase agreement for local water rights.
Couloir also lifted its fair value per share estimate on the resource firm to C$4.04 each, from C$3.31 previously. Shares in Cypress Development are currently changing hands at C$1.84 each.
The pilot plant, located around 100 miles south of the project, includes four main sections - a leaching area, a tailings handling area, a pregnant leach solution (PLS) treatment area, and a Direct Lithium Extraction (DLE) process (in this case, the Lionex process) area.
The Couloir analysts said the completion of the pilot plant was a "major milestone" pushing the project towards the feasibility stage.
READ: Cypress Development completes assembly of pilot plant at Clayton Valley
"With the results of the pilot testing program, we believe that CYP can significantly advance its understanding of the metallurgical characteristics of its project’s lithium-bearing clay deposit, which in turn should help CYP ascertain the feasibility of commercial-scale lithium extraction at the mine," said analysts.
"We believe that moving to the FS stage of the development cycle could materially unlock value currently tied up in uncertainty around the potential of Clayton Valley’s future cash flows."
"By both testing the metallurgical qualities of the Clayton Valley claystone material (determining its suitability for large-scale lithium hydroxide production) and de-risking the mine by moving it to the FS stage, we see the pilot plant developments as positively catalytic."
In May this year, Cypress Development signed a letter of intent (LOI) with a subsidiary of Nevada Sunrise Gold Corp over the purchase of water rights (entered formally in September). This allows for the use of 1,770 acre-feet per annum (AFA) for mining, milling, and domestic use, representing around 55% of the projected water needs for the project, noted the analysts. The company is paying cash and shares totaling US$3 million.
Couloir also highlighted that the company's ongoing testing of lithium extraction through chloride leaching may "significantly reduce the forecasted water needs of the project," which may, in turn, reduce the firm's need to purchase additional water rights.
It may also be able to use saltwater in processing, according to management, which "would reduce fresh water needs and allow the company to exercise greater flexibility in water procurement", added analysts.
As of June 30 this year, the firm had cash and working capital of C$19.38 million and C$19.27 million respectively.
Cypress Development Corp is advancing its wholly-owned Clayton Valley Lithium project in Nevada, the site of a world-class resource of lithium-bearing claystone adjacent to the Albemarle Silver Peak mine - North America's only lithium brine operation.
A positive pre-feasibility study for the property was announced by the company in August 2020.