Shaw and Partners has maintained its Buy recommendation and $3.50 price target for Global Lithium Resources Ltd (ASX:GL1) based on GL1 further expanding its resource base by 25% in the next 12 months and trading at an industry average developer multiple of A$1,000/t of Li2O resource.
In a busy period of catalysts ahead, Shaw expects GL1 to report exploration results, geotechnical surveys, metallurgical test work, a resource update, pre-feasibility study and definitive feasibility study all before the end of 2023 prior to final investment decision (FID) in 2024.
Shaw is positive on the lithium price heading into the second half of 2023.
The following is an extract from Shaw’s research update on GL1:
Event
Global Lithium will invest up to $4.6m for a 10% stake in Kairos Minerals Ltd (ASX:KAI, OTCQB:KAIFF). Kairos holds 240km2 of contiguous exploration licenses (the Roe Hills Lithium Project), immediately south and adjacent to Manna. Multiple lithium anomalies have been identified at Roe Hills which will be drill tested. In a busy period of catalysts ahead, we expect GL1 to report exploration results, geotechnical surveys, metallurgical test work, a resource update, pre-feasibility study and definitive feasibility study all before the end of 2023 prior to FID in 2024. We are positive on the lithium price heading into the second half of 2023. Buy
Highlights
- Global Lithium has two key assets: the Manna Lithium Project (100%) and the Marble Bar Lithium Project (100%). Both are in WA and located alongside world class lithium deposits in similar geological settings.
- GL1 has invested $4.6m for a 10% stake in Kairos Minerals Ltd, which owns the Roe Hills Lithium Project, comprising 18 tenements of contiguous licences adjacent to Manna. Funds invested by Global Lithium will be spent exploring and developing Roe Hills.
- The first stage of ore sorting trials at Manna indicated a 90% increase in lithium head grade from 0.88% Li20 to 1.67%. Equally impressive, the mixed waste and pegmatite sample delivered a 93% reduction in iron (Fe2O3) from 6.3% to 0.4%.
- The base case Scoping Study on Manna assumed a 15 month payback on pre-production capex $437m for a ten-year project producing 220kt per year. The study NPV8 was $2.8bn, IRR was 103%.
- Global Lithium finished March with $70.6m cash which leaves it well funded to complete the exploration, geotechnical surveys, metallurgical test work, PFS, DFS and ultimately proceed to FID in 2024.
- GL1 has started its 2023 drilling program at the Marble Bar Lithium Project. The program has up to 20,000m drilling planned to explore lithium and gold across Marble Bar. The company recently completed its heritage surveys across Pegmatite Corridor 2 and Twin Veins targets.
- We are positive on the lithium price heading into 2HCY23 following a challenging 1QCY23. De-stocking appears to have given way to re-stocking once again and anecdotal reports suggest inventories at Chinese converters are falling. We expect 2023 EV sales to rise and penetration to grow.
- GL1’s management team is highly experienced in a sector that is rapidly evolving. Managing 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. Nonexecutive Director Greg Lilleyman was previously the Chief Operating Officer of Fortescue (ASX:FMG) Metals for 4 years and has held senior roles at Rio Tinto (ASX:RIO).
- Global Lithium is strategically well positioned with shareholder support from Mineral Resources and Suzhou. The company’s assets are located adjacent to Mineral Resources’ Wodgina and Mt Marion deposits. MIN has an 8% interest in GL1.
- Suzhou TA&A Ultra Clean Technology (NASDAQ:UCTT) Co. (9.9% of GL1) is affiliated with China’s largest electric vehicle battery maker, Contemporary Amperex Technology (CATL). GL1 has a 10- year Offtake Agreement with Suzhou TA&A.
Recommendation
We maintain our Buy recommendation and $3.50 price target. Our price target is based on Global Lithium further expanding its resource base by 25% in the next 12 months and trading at an industry average developer multiple of A$1,000/t of Li2O resource.