Small-cap lithium explorer and developer Atlas Lithium Corp. (ATLX:NASDAQ) announced it has signed definitive investment and offtake agreements with Mitsui & Co. ("Mitsui"), a company that has a market cap in excess of US$70 billion and boasts Warren Buffett as a major shareholder through Berkshire Hathaway (NYSE: BRK.A, BRK.B)
Mitsui, one of the largest trading companies in Japan, is buying US$30 million in common shares of Atlas at a 10% premium to the five-day volume-weighted average price (VWAP) and also entering into an offtake agreement for the future purchase of lithium concentrate from Atlas over several years.
Atlas is the only Brazilian lithium company with executed binding offtake agreements to progress its Minas Gerais lithium project towards production in Brazil's Lithium Valley. In December 2023, the company announced US$50 million in deals with two of the world's largest lithium hydroxide producers. Now, Atlas has added an additional US$ 30 million from one of Japan's largest trading and investment houses to its list of partners, further validating its business model and future prospects.
Technical Analyst Clive Maund is predicting a new bull market in the metal after a decline last year. Atlas is "set to be in a vastly superior position to many of its competitors" when that happens, he wrote this week.
"The worldwide lithium battery market is expected to grow by a factor of five to ten over the next decade, so this is a big growth market," the technical analyst noted. "The relatively low lithium prices in the recent past will be self-correcting as they will force weaker, less competitive producers 'to the wall' and thus cause prices to stabilize and probably advance anew in response to rising demand."
Several of Atlas' lithium properties neighbor those of Sigma Lithium Corp. a producer with a market capitalization of US$1.3 billion. Atlas boasts hard-rock lithium of similar quality, as demonstrated by multiple metallurgical studies. The company's lithium deposits are also close to the surface, allowing for relatively inexpensive and expeditious open-pit mining techniques to be employed. This advantageous positioning is expected to enable Atlas to achieve production by the fourth quarter of 2024.
Analyst Heiko F. Ihle of H.C. Wainwright & Co. maintained his Buy rating on the stock in February with a price target of US$52 per share.
"By mid-2025, Atlas plans to be producing lithium in annualized quantity that is similar to the current production by Sigma, which kind of makes it intriguing that Sigma's current market valuation is 9X that of Atlas, and this strongly suggests that this gap could narrow substantially, most likely through appreciation of Atlas' stock," wrote Maund.
This morning, Maund shared an update on Atlas, saying, "This is REALLY BIG NEWS, which, in addition to being a massive vote of confidence in the company, means that Atlas can aggressively and rapidly advance its lithium projects through to substantial production, and due to this, it will have an additional and substantial assured market for its product."
A soft, silvery metal, lithium's most prominent applications are in the rapidly growing fields of electric vehicle (EV) batteries and energy storage systems, but it also plays crucial roles in strengthening alloys, serving as a high-temperature lubricant, and even acting as a medication to treat bipolar disorder.
The market for the metal is projected to grow from US$2.5 billion in 2023 to US$6.4 billion by 2028 at a compound annual growth rate (CAGR) of 20.4% from 2023 to 2028, according to a report by Markets and Markets.
The Catalyst: Advancing Project to Production
In January 2023, Atlas announced it had signed a memorandum of understanding (MOU) with Mitsui for potential interest in its future lithium concentrate production.
Atlas noted in a release that the two companies have "since developed a close rapport," including exchanging visits.
"Today marks a significant milestone for Atlas Lithium as we progress towards our goal of becoming a key lithium supplier to the global EV battery materials supply chain. Mitsui's investment reflects confidence in our team, assets, and business model," said Atlas Chairman and Chief Executive Officer Marc Fogassa.
Closing of the deal was expected within ten days, subject to customary approvals. Atlas' advisor is Goldman Sachs & Co., and its legal counsel is DLA Piper U.S.
Technical Analyst Clive Maund rated the stock a Strong Buy for all timeframes.
The investment "delivers additional financing to allow Atlas Lithium to continue to aggressively advance its development towards operation of an open pit lithium mine and spodumene concentrating facility by the fourth quarter of 2024," Atlas noted.
At the same time, Mitsui is purchasing the common shares of ATLX at a premium and is entering into an offtake agreement with Atlas for the future purchase of 15,000 tons of lithium concentrate from Phase 1 of Atlas' soon-to-be-producing Neves Project and 60,000 tons per year for five years from Phase 2.
Atlas also has binding agreements with two of the world's largest lithium hydroxide producers: Yahua, a lithium chemical supplier to Tesla; and Chengxin, a battery-grade lithium supplier to BYD, the largest electric vehicle (EV) maker globally. The two Chinese companies have committed the US$50 million (US$10 million as equity at US$29.77 and US$40 million as non-dilutive offtake prepayment) in exchange for 80% of Atlas Lithium's Phase 1 lithium concentrate production.
New Plant Nearing Completion
The lithium Atlas plans to mine in Brazil is contained within spodumene, a lithium-bearing mineral found in pegmatites or hard rock deposits. The extraction method employed by Atlas to retrieve lithium concentrate from its mined spodumene consumes considerably less water and offers superior ESG outcomes compared to the extraction of lithium from brines.
Spodumene-based lithium extraction offers "lower capital costs and a shorter time from discovery to production in comparison to brine operations," noted Feeco International.
The new plant is nearing completion, and its "compact, modular design" will be built off-site and transported in a semi-assembled state before being fully constructed in Brazil, according to the company.
"Management laid out the development timeline for the project targeting initial spodumene concentrate production under Phase 1 by 4Q24, which is a full year ahead of our prior estimate of 4Q25," Alliance Global Partners analyst Jake Sekelsky wrote in December. "As a result, we are reiterating our Buy rating and increasing our price target to (US)$75.00 from (US)$70.00 per share."
Analyst Heiko F. Ihle of H.C. Wainwright & Co. maintained his Buy rating on the stock in February with a price target of US$52 per share.
"Management expressed their view that the high quality of its plant and production process played an important role in Chengxin and Yahua becoming offtake buyers," the analyst wrote. "Looking ahead, this could also lead to more future partnerships if the company remains on schedule."
A Great Entry Point
Maund said the company's stock is being "shepherded higher by a giant and broad parabolic uptrend channel that kicked off with an extraordinary spike early in 2021, which was followed by a violent reaction that led into a long slump which found support at the lower parabolic boundary, which is exactly what it is doing right now."
Streetwise Ownership Overview*He continued, "Even though the parabolic uptrend channel shows a gradual acceleration, within it the price has the potential to accelerate dramatically and make huge gains within a short space of time, as it has done on several occasions already, because this channel is so broad."
Since it's significantly oversold and close to that lower channel boundary, he said, "It certainly looks like it is at a great entry point here."
Maund rated the stock a Strong Buy for all timeframes.
Ownership and Share Structure
About 40% of Atlas Lithium is owned by management and insiders. About 18% of the shareholders are institutional. The rest, about 42%, is retail.
Other top shareholders include Waratah Capital Advisors Ltd. with 6.13%, Invesco Capital Management LLC with 3.36%, Weiss Multi-Strategy Advisers LLC, with 2.57%, and Candace Shira Associates LLC with 2%.
Its market cap is about US$151 million. It trades in a 52-week range of US$45 and US$11.80.
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Important Disclosures:
- Atlas Lithium Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Atlas Lithium Corp.
- Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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