This announcement is about 3 weeks old. The National Bank of Canada gives a value of $1.90 Canadian (about $1.5 US) in 12 months.The company’s web site has the full article.
HIGHLIGHTS
? Emerging lithium junior with solid partnership: AAL is an emerging supplier of lithium carbonate (Li2CO3), with a 75% ownership in a JV with Orocobre (ORE), one of the world's largest lithium producers, on the Cauchari lithium project in Argentina. AAL's strategic relationship with ORE should reduce any future exploration, operating and construction risks.
? Updated resource estimate should be a key catalyst: AAL currently has about 470 kt LCE (lithium carbonate equivalent) of inferred resources (average well depth of 144m at 384 mg/l lithium). With positive drill results showing grades well over 500 mg/l at depths over 350 m, an updated resource estimate could come in Q2 2018E and we believe it could grow to between 2.1 and 3.5 mt LCE.
? A well-placed project could be a consolidation target: Relative to its peers, AAL is closer to infrastructure and two existing lithium operations that include large and well capitalized partners. Some consolidation of the three unique assets with shared boundaries could make sense.
? Battery demand puts pressure on supply chain: With growth in demand for lithium batteries for electric vehicles and grid power storage, demand is soaring for lithium salts (Li2CO3 and LiOH). Falling battery costs could drive demand growth for years to come. Spot prices for Li2CO3 remain high, at more than $18,000/t. The price should come back to the long-term average (<$8,500/t), but the market could be in short supply for a few years.
? Risks and headwinds: AAL needs capital and lithium markets are at risk of oversupply over the next few years. Commissioning of a brine operation takes time and is subject to uncertainties.
? Valuation and recommendation: Our C$1.90 target is based on peer analysis, assuming a growing resource and a NAV analysis using a 10% WACC discount rate with a relatively conservative lithium carbonate price deck.
