VSA Morning Miner, 18/11/20
American Lithium (CVE:LI)
American Lithium (CVE:LI) has announced a new drilling programme of six holes to allow exploration to the north and northwest of the existing resource. This resource boundary was limited by the northern limit of the company’s exploration acreage and with the announcement in July that the company had acquired an additional 52 claims contiguous to its current land package equating to 1,074 acres this drilling programme will seek to confirm this.
American Lithium’s resource which is currently over 7mnt contained LCE extends from surface and is shallow. The six holes in this programme will therefore be capped at 400ft as the dip of the structures is not expected to change substantially where the lithium bearing structures are projected to extend into the new claims.
Crucially this will provide additional material for the company to progress its metallurgical testwork. The results to date demonstrated success using a hydrothermal process with acid with lithium recoveries of over 90% in less than ten minutes and subsequent testing confirmed production of lithium carbonate. The announcement also highlights that American Lithium is also working on other potential flowsheets including a thermal process. Whilst the initial work is encouraging and forms a robust base case, in our view, success on this latter thermal flowsheet would certainly result in investor interest given the comments at Tesla’s Battery day although we caveat that this process would likely be some way from commercialisation.
The larger resource and results of the met testing will inform the economic studies due in early 2021 which present a further potential catalyst for the stock.
The result of the US election provides a significant potential industry catalyst with Joe Biden expected to be a strong supporter of EVs and renewables. EV subsidies kickstarted sales growth in the EU and China and a restoration of the US EV subsidy could result in a US catch up. State spending on charging infrastructure would debottleneck EV sales further. Although the development of a domestic US battery manufacturing industry now appears more likely, the lack of domestic lithium supply remains unchanged and support for critical minerals such as lithium and projects such as American Lithium’s means the backdrop for the company continues to strengthen.
We reiterate our Buy recommendation and C$3.94/sh. target price.
VSA Capital Limited, New Liverpool House, 15-17 Eldon Street, London EC2M 7LD | www.vsacapital.com
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