Canaccord Genuity slightly lowers target price on Atlantic Lithium

Canaccord Genuity lowered its target price on exploration and development firm Atlantic Lithium from 80.0p to 75.0p on Friday after the Ghanaian Government awarded it the mining lease for the Ewoyaa lithium project.

The analysts said this was a "key milestone" in the development process, with only environmental approval remaining as the last major licensing hurdle, which it expects to take place in the first half of 2024.

The lease will need to be ratified by the Ghanaian Parliament before it is final, with the terms of the 15-year lease including a requirement to reach commercial production within 24 months of ratification, an increase in the Government free carry from 10% to 13%, and an increase in the royalty from 5% to 10%. The equity split of joint venture partners at the project level going forward will be - Atlantic Lithium at 40.5%, Piedmont Lithium at 40.5%, MIIF at 6%, and the Government of Ghana at 13%.

"Our take: Beyond the obvious benefit of progressing towards development, the award should lay to rest concerns about the Government restricting the export of lithium in its 'raw state' (whether this was a reference to spodumene concentrate or simply DSO is unclear). ALL now has its key permit in place, and project participation levels align national interests (in our view)," said Canaccord, which reiterated its 'speculative buy' rating on the stock.

"We view Atlantic as one of the highest quality hard-rock developers globally. The Ewoyaa project has low opex (US$377/t), low capex (US$185m), simple processing, and a fast path to production (early production to come 9 months after commencement of construction, with full scale ~344 ktpa to come 9 months later). ALL continues to trade at a discount to peers, with a P/NPV of ~0.35x (vs ~0.5x for peers), which we believe does not reflect the advanced nature of the project."

Reporting by Iain Gilbert at Sharecast.com