Savannah Resources PLC (AIM:SAV, ETR:SAV, OTC:SAVNF) is undervalued ahead of the potential development of the Baroso lithium mine project in Portugal, according to stockbroker WH Ireland.
The company, today, updated on the ongoing environmental review process underway by the Portuguese regulator.
With a fair value estimate of 13.5p, versus a prevailing market price of just 2.64p the City broker plainly sees substantial upside.
Key to the investment case described by WH Ireland is the strategic significance of lithium, especially lithium that is found in Europe.
“With the ever-increasing focus on Europe’s lack of ‘critical’ metal production we believe projects like Barroso can help bridge the gap and provide some of the raw materials (lithium in this case) to go towards self-sufficiency,” WH Ireland analyst Paul Smith said.
He noted: “Savannah’s project is firstly economic (especially with current spodumene prices) and is environmentally sound in our view; the project is an open pit with a simple flow sheet using non-toxic chemicals to separate a spodumene (and feldspar and quartz) concentrate which minimises tailings and leaves no undesirable minerals remaining.”
“We are hopeful that the current process with the APA will allow Savannah to produce an EIA which will be accepted by the Portuguese authorities and, in turn, allow for the final pieces of the feasibility study to be completed and for Barroso to be permitted," Smith concluded.
Savannah entered into an ‘article 16’ review with Portugal's environmental regulator back in July.
The company noted that it has since had several ‘very useful and productive’ meetings with the regulator, and, it has gained a good understanding of the regulator’s requests regarding certain aspects of the project. Talks have so far covered project infrastructure and the management of local water resources.
Further meetings are being scheduled to address a few remaining aspects of the project which the regulator would like to see revised, Savannah noted.
Savannah has retained international engineering and environmental consultancies Knight Piésold, Quadrante and VISA Consultores to work on project designs based on requests.
The company also confirmed that it will have up until 17 March 2023 to submit its revised plans to the regulator, after that the regulator will have a maximum of 50 working days to complete its review.