Isn't CRE undervalued too?????
Nemaska Lithium “considerably undervalued”, says Industrial Alliance Securities
1:42 pm by Carrie White
Nemaska Lithium gets a speculative buy rating from Industrial Alliance Securities, who also raised their price target for the company, sending shares higher Tuesday.
Shares of () moved higher Tuesday after Industrial Alliance Securities (IAS) reiterated its “speculative buy” rating and raised its target price on the company, citing improved project economics and confidence that the company can compete against its peers.
IAS introduced a new, 12-month target of $1.45, up from $1.10. The firm said the company currently trades at a rough 0.11 times discount to its net asset value and is “considerably undervalued” to its peers.
The Quebec-focused junior exploration company last week announced plans to build and operate a 500-tonnes-per-year lithium hydroxide phase 1 plant, separate from its Whabouchi lithium project.
IAS analyst Killian Charles noted that at the same time, the company is advancing through environmental, social and economic impact assessment (EESIAS) with both federal and provincial agencies at Whabouchi.
“The lithium hydroxide phase 1 plant is expected to cost roughly $25 million and should be operational by early first-quarter 2014,” said Charles in a research note Tuesday.
Under the terms of the deal, Phostech – a Clariant AG Group company – will evaluate and buy Nemaska's output of lithium hydroxide monohydrate at its phase I plant.
Any excess will be sold to other industrial third parties, who will be able to confirm the lithium hydroxide product’s quality through independent means.
IAS said that it believes the phase 1 plant is closer to a pilot plant than a commercial entity that will generate cash flow for Nemaska.
“Nemaska holds the only patents to convert spodumene to lithium hydroxide,” said the firm. “Therefore, this proof-of-concept plant will probably focus on demonstrating Nemaska’s ability to supply the market with a new source of lithium hydroxide as opposed to purely generating cash flow.”
As the project is still in the permitting phase, IAS noted that the feed for the plant will be sourced from the open market.
“Additionally, with the company moving rapidly toward commercial production, we have increased our target price from $1.10,” said Charles.
“This increase is due to improved project economics following the 2012 Whabouchi mine and plant PEA, and rising confidence that Nemaska can cut itself a place amongst other lithium product producers.”
For Whabouchi, Industrial Alliance noted that the EESIAS draft report is supervised by the Quebec Government and the Canadian Environmental Agency.
“There is the potential for overlap within each report, which will reduce the time required to complete each one,” said the capital markets firm.
The project must also undergo public consultations with local communities.
“Importantly, the local community was an early shareholder of Nemaska and, while their position has since been diluted, continues to remain so,” added Industrial Alliance.
Nemaska’s shares were up 2.22 per cent as at about 1:40 p.m. EDT, trading at 46 cents.