MoneyTalks: Broker slaps Buy rating on lithium play Argosy Minerals, with a big price target
Canaccord Genuity has labelled ASX lithium producer Argosy Minerals a good buy, setting a target price more than double its current value.
MoneyTalks is Stockhead’s regular recap of the ASX stocks, sectors and trends that fund managers and analysts are looking at right now.
Canaccord Genuity has slapped a Buy rating on Argosy Minerals (ASX:AGY) with a price target of 27 cents (versus its value on Wednesday morning of 12.7c).
Argosy is a $190 million market-capped lithium development company progressing the Rincon Lithium Project in Argentina.
It also owns the Tonopah early stage lithium prospect in Nevada, US.
Earlier this month, Argosy announced that the government of Salta Province in Argentina had approved the company’s environmental impact assessment (EIA) for the development of a 10ktpa battery grade lithium carbonate expansion at its 77.5 per cent-owned Rincon Lithium Project.
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This expansion is expected to bring the total capacity of the project to 12ktpa LCE (lithium carbonate equivalent).
“The approval de-risks Rincon, in our view, and shores up the development timeline,” noted Canaccord. “We believe given the long-term nature of the project, debt will become available to the company.”
AGY had already engaged service providers in anticipation of receiving approval of the EIA, so that it can transition into the development phase.
Following the approval, the company will now look to progress the pre-development engineering works for the 10ktpa expansion in preparation for an FID (final investment decision).
Dynamic modelling
On January 15, AGY announced that it had upgraded its Mineral Resource Estimate by 180 per cent at the Rincon Project to 687kt LCE @ 329mg/l (from 245kt LCE @ 325mg/l), with 606kt of the Resource now sitting within the Indicated category.
Following this upgrade, the company undertook additional dynamic modelling works aimed at simulating different brine abstraction scenarios with varying pumping rates and borefield configurations.
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The modelling focused on two main scenarios:
- 12ktpa of LCE for a period of 42 years
- An expanded operation of 24ktpa LCE for 22 years.
“The company believes that the increase in capex related to upscaling to a 24ktpa operation is either more efficient or proportional, such that when combined with an extended mine life, does not materially change project economics,” said Canaccord.
2024 critical year for 2000ktpa plant
Meanwhile, AGY completed its 2000ktpa plant in Argentina in December 2022, and has since been working through a number of issues surrounding project.
AGY has kept the market up to date with progress at the plant on a monthly basis, with the primary focus around the filtration circuit, continuous operations and equipment reliability.
“We continue to view the 2000ktpa plant as a valuable part of AGY, with learnings able to be applied to the 10ktpa expansion, and ultimately for the plant to generate positive cashflow,” said Canaccord.
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However, CG believes 2000ktpa plant highlights the difficulty in ramping up brine operations.
“AGY will need to build production momentum if it is to prove its process and attract a partner for the 10ktpa expansion, in our view,” its assessment said.
In its April update, AGY highlighted it anticipated achieving continuous production in the coming months, and had begun product testing (with existing production) with potential offtake partners.
“Our price target is based on a NPV 10 per cent for Rincon, which is risked according to project stage,” said Canaccord.
“We use $US22,500/t LC lithium carbonate price, AUD/USD currency of 0.75, and 10 per cent discount rate in our NPV calculation.”
This content first appeared on stockhead.com.au
The views, information, or opinions expressed in this article are solely those of Canaccord Genuity and do not represent the views of Stockhead. Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.
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