Global Lithium Resources Ltd (ASX:GL1) has maintained a buy recommendation with a share price target of $3.50 from Shaw and Partners.
The analyst’s price target is based on the company further expanding its resource base by 25% in the next 12 months and trading at an industry average developer multiple of A$1,000 per tonne of lithium resource.
Global Lithium’s shares are currently trading at A$1.72 with a market capitalisation of $444.98 million.
The following are the excerpts from Shaw and Partner’s research report:
Key risks
- Global Lithium Resources is predominantly an exploration company and therefore carries significant exploration risk;
- There is no guarantee that future exploration results will be positive;
- The Manna Lithium Deposit and Marble Bar Lithium Deposit are not yet producing and there is risk that Global Lithium Resources is unable to bring the operation into production;
- The project may cost more than expected to build and may not operate as expected;
- Smaller companies carry more significant ‘key personnel’ risk than larger organisations;
- If senior management departs the company then it could delay projects or exacerbate operational risks; and
- The lithium price is currently trading well above cost curve support and there are risks that if demand for lithium does not meet expectations then the lithium price could revert to historical averages.
Core drivers and catalyst
- GL1 is a hard-rock lithium developer focused on tier-1 jurisdictions;
- The company’s key assets – the Marble Bar Lithium Project (MBLP, 100%) and the Manna Lithium Project (Manna, 100%) – are located close to world-class lithium deposits and appear to be in similar geological settings;
- Both projects are in well-established mining regions with access to infrastructure – the Pilbara region (MBLP) and close to Kalgoorlie (Manna);
- GL1 is one of only the three standalone ASX-listed WA lithium developers with a JORC-compliant resource (ESS and LTR are the others);
- The company’s projects have a combined mineral resource of 50.7 million tonnes at 1.0% Li2O;
- The company’s assets are located adjacent to Mineral Resources’ Wodgina and Mt Marion deposits, and Mineral Resources has an 8% interest in GL1;
- Suzhou TA&A Ultra Clean Technology Co. (9.9% of GL1) is affiliated with China’s largest electric vehicle battery maker, Contemporary Amperex Technology (CATL);
- GL1 recently announced a 10-year offtake agreement with Suzhou TA&A;
- Executive director Ron Mitchell has more than 11 years in the lithium and battery metals industry with senior roles at Tianqi Lithium Corporation and Talison Lithium; and
- Non-executive director Greg Lilleyman was previously the chief operating officer of Fortescue (ASX:FMG) Metals for four years and has held senior roles at Rio Tinto (ASX:RIO).