BMO Capital Markets analyst Greg Jones has maintained an Outperform rating and a CA$2.00 target price on Lithium Ionic Corp. (LTHCF) following Pilbara Minerals’ announcement of its intention to acquire Latin Resources (LRSRF). This announcement, valued at approximately US$370 million, represents a 32% premium to LRS’s 30-day VWAP.
Jones highlighted that Pilbara’s acquisition of Latin Resources, with its defined resources of 77.7Mt at 1.24% Li2O, signifies an EV/resource multiple of ~US$150/t LCE. This aligns with multiples observed in recent lithium developer transactions.
Jones sees this development as potentially positive for Lithium Ionic, stating that LTHCF currently trades at a discount compared to its hard rock developer peers on an EV/resource basis. He believes that a re-rating towards the peer median could result in a significant share price uplift of approximately 50%.
Jones emphasized the similarities between Lithium Ionic’s and Latin Resources’ projects. Lithium Ionic has defined resources of 60.1Mt at 1.28% Li2O, expects to receive permits for construction at Bandeira soon, and plans to deliver a Preliminary Economic Assessment (PEA) on its Salinas project later this year. This project is directly adjacent to the LRS project.
The analyst believes that Pilbara’s entry into the Brazilian lithium market, where both Lithium Ionic and Latin Resources operate, could be beneficial for LTHCF. The presence of an established lithium producer in the region provides a tangible value benchmark for neighboring projects, which Jones expects will lead to a positive reaction from the market.
Lithium Ionic’s strategic focus remains on advancing its Bandeira project towards production and developing the Salinas project. The company is well-positioned in Brazil’s emerging lithium region, which Pilbara cited as a key factor in their decision to acquire Latin Resources.
BMO Capital Markets’ valuation methodology for Lithium Ionic remains unchanged from their previous report. This methodology relies on a combination of a Net Asset Value (NAV) multiple and an in-situ value for resources. With an Outperform rating and a target price of CA$2.00, representing a potential total return of 285% from the current price of CA$0.52, BMO Capital Markets continues to see significant upside potential for Lithium Ionic.
Jones concluded that the Pilbara-Latin Resources transaction could be the catalyst for the re-rating of Lithium Ionic shares that he previously suggested as a possibility.
