Initiating coverage - DesjardinsBuySpeculative rating and C$3.75 target price. Frontier is an upcoming producer of lithium concentrate with a growing hard rock resource that boasts one of the best grades in North America. The company’s flagship PAK lithium project is comprised of four discoveries in northwest Ontario—PAK, Spark, Bolt and Pennock.
Our C$3.75 target price is based on our NAV (Exhibit 62) incorporating an NPV (10% discount rate) of PAK, with a 0.8x P/NAV multiple reflecting strong grades, pre-PFS status and limited visibility on an infrastructure buildout. In our view, the latter two factors imply a potential valuation re-rate with the release of study results and infrastructure development. Announcements on offtakes/partnerships are also a potential valuation tailwind, in our option.