Standard Lithium is a Buy, says Eight Capital

Impressive new lithium brine samples from Standard Lithium (Standard Lithium Stock Quote, Charts, News, Analysts, Financials TSXV:SLI) have Eight Capital analyst Anoop Prihar staying bullish on the stock in a Wednesday update.

Standard Lithium, which is developing a proprietary lithium extraction technology and has two lithium projects in Arkansas, released on Tuesday new brine samples from its South West Arkansas (SWA) Project. The company sampled brine with lithium grades of up to 581 mg/L and an average of 563 mg/L. SLI says they are the highest confirmed lithium brine grades in Arkansas and come after similar high-grade results from the company’s resources in Texas.

“We continue to be very pleasantly surprised by the lithium grades sampled from our projects in Arkansas and Texas. We previously developed the Preliminary Economic Assessment (PEA) for the SWA Project using a conservative assessment of the lithium brine grades across the project area. Using that conservative resource basis still yielded a PEA with very attractive project economics,” said President and COO Andy Robinson in a statement.

Prihar said the new results could be incorporated into the company’s Pre-Feasibility Study on the SWA Project, which should be released by the end of the current quarter.

“The Preliminary Economic Assessment (PEA) on the SWA Project assumed an average lithium grade of 255 mg/L, and an LCE resource of 1.2 mm tonnes. As the average lithium grade of these new results is more than double that of the grade used in the PEA, there could be a positive impact on the project economics as well as the resource,” Prihar wrote.

In other lithium news, Prihar reported that Exxon Mobil recently acquired 120,000 gross acres in the Smackover Foundation southwest of the SWA Project, paying US$100 million from Galvanic Energy. Prihar said the Galvanic LCE resource is estimated at 4.0 million tonnes and with an average lithium grade of 325 mg/L.

With the update, Prihar maintained a “Buy” rating on SLI and $12.00 target price, which implied at press time a one-year return of 117 per cent.

“Our NAV values both the LANXESS and SWA projects using a DCF, while SLI’s California exploration property, investment in Aqualung, and net cash are included at book value. As our target price represents a 117 per cent potential return, we continue to rate SLI as a BUY. Risks to our rating and target include commodity price risk, execution risk, and capital risk,” he said.