Update from Canaccord this morningFrom Katie Lachapelle & Meaghan Charlebois at Canaccord:
Provincial permits finally in hand: This morning, Critical Elements announced the receipt of the Certificate of Authorization for its flagship Rose Lithium Tantalum Project from the Quebec Minister of the Environment, the Fight against Climate Change, Wildlife and Parcs for its flagship Rose Lithium-Tantalum Project.
Our take — positive: The receipt of the long-awaited provincial permit represents a significant milestone for the Rose project and sets the stage for accelerated project advancement in the coming months. Despite receiving its final federal permit in August 2021, the company experienced significant delays in the receipt of its provincial permit, which weighed heavily on its stock price performance and ability to advance Rose. In our view, this overhang is now removed, and today's news should act as a key re-rating catalyst for the company.
Next steps: With both federal and provincial environmental permits in hand, the company can now accelerate project financing discussions in advance of a final construction decision. Construction of Phase 1 at Rose can commence once a mining lease is issued by the MNRF, which we expect CRE to receive with minimal issues now that environmental permits are in place.
In our view, finalized permits were a pre-requisite to securing financing and/or strategic partnerships for the project. We expect interest in the project to increase considerably following this announcement. The company was already evaluating interest from potential partners (OEMs, battery groups, cathode manufacturers, etc.); and during this time (as they awaited permits), the intensity of parties looking for offtake has increased substantially.
In our view, a firm partnership agreement would be catalytic to CRE's shares and present another re-rating opportunity. Depending on the terms of the agreement, it could also be far less dilutive than our current financing assumptions, which assume 50% of initial capex is funded via debt and the remainder through CRE equity.
Maintain SPEC BUY; C$3.50/sh target price: Our estimates remain unchanged at this time. CRE currently trades at 0.39x NAV, well below peers at 0.62x NAV.
Potential upcoming catalysts:
- Strategic partnership and financing (discussions ongoing)
- Lemare initial mineral resource estimate (early 2023)
- Ongoing exploration results
- Potential construction decision for Phase 1 (late 2022/2023)