In an Aug. 8 research note, ROTH Capital Partners analyst Joe Reagor reported that Piedmont Lithium Ltd.'s (PLL:NASDAQ; PLL:ASX) updated scoping study for its North Carolina lithium project is "supportive of our positive outlook for the project as it confirmed robust project economics." Accordingly, ROTH reiterated its Buy rating on Piedmont.
At the same time, though, ROTH lowered its target price on the energy firm to $36 per share from $38. In comparison, Piedmont is currently trading at around $9.56 per share. The reasons for the cut were a higher estimated initial capex for the lithium project and the continued weakening of the Australian dollar against the U.S. dollar.
Reagor reviewed the highlights of the scoping study released Aug. 7. The positives, he pointed out, are the increased mine life, the operation's low cost (below ROTH's expectation), the estimated 34% after-tax internal rate of return and $1.45 billion net present value. "We continue to believe Piedmont's lithium project is a world-class asset on the fast track to development," commented the analyst.
As for the study's negatives, noted Reagor, one is the now $168 million upfront capex required, up from $130 million, even though most of that is due to the larger project size, and the lower-than-expected operational costs do offset some of it.
The Australian dollar's weakening trend is another dampening factor. As such, ROTH raised its estimate of Piedmont's future development equity financing need to AU$95 million from AU$75 million. This resulted in a higher share count estimate and a reduced price target.
Reagor concluded the report, "We remain positive on Piedmont Lithium."[NLINSERT]
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Disclosures from ROTH Capital Partners, Piedmont Lithium Ltd., Flash Note, August 8, 2019
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
ROTH makes a market in shares of Piedmont Lithium Limited and as such, buys and sells from customers on a principal basis.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months.