Standard Lithium has a 109 per cent upside, says Eight Capital

Eight Capital analyst Anoop Prihar is sticking with a “Buy” rating on lithium miner Standard Lithium (Standard Lithium Stock Quote, Charts, News, Analysts, Financials TSXV:SLI). Prihar updated clients on the company in a Tuesday update, saying the stock is rich in near-term catalysts.

Vancouver-based Standard Lithium is a near-commercial development company with a proprietary lithium extraction technology that’s developing its Lanxess Project and South West Arkansas (SWA) Project, both in Arkansas near the Louisiana border. SLI also has well and drilling rights in East Texas in the Smackover Foundation.

The stock has gone from a high around $15 in late 2021 to the $4-$6 range where it’s been trading over the past six months. 

But Prihar sees upside over the next 12 months, having reiterated a target price of $12.00, which at press time represented a projected return of 109 per cent.

Prihar says SLI is in the final stages of completing a Definitive Feasibility Study (DFS) and a Front-End Engineering Design (FEED) study on its Lanxess Project, with both of these on track to be completed around the end of the second quarter this year.

The analyst noted that after the DFS is completed, company LANXESS AG will have an option to acquire between 30 and 49 per cent of the project’s equity, but if LANXESS AG chooses not to acquire, SLI has the right to seek another partner for up to 49 per cent of the project, with development costs to be shared on a pro-rata basis.

Prihar said the latter option could open the door to another high-quality partner.

“Although we expect that the project costs may rise relative to the 2019 PEA, we believe that the LANXESS Project will continue to exhibit favourable economics by incorporating a higher selling price,” Prihar wrote.

“We would note that the PEA assumed an average carbonate selling price of US$13,550/tonne, while spot carbonate prices are currently in the US$40,000/tonne range. In addition, SLI has been working on various process improvements that could also benefit the project’s economics,” he said.

Standard Lithium is also in the process of completing a Pre-Feasibility Study (PFS) on the SWA Project, also on track for completion around the end of the current quarter. Prihar said SLI’s new lithium grades from brine samples in May were impressive, recording the highest confirmed lithium brine grades found in Arkansas, and the project is expected to have the lowest operating costs of any hydroxide project globally.

“Our $12.00/share target price remains unchanged and is derived by applying a 25 per cent discount to our NAVPS estimate of $16.00. 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. We continue to rate SLI as a BUY,” he said.