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Lithium Co. With Offtake Agreements Catches Analysts' Eyes

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Atlas Lithium Corp. is garnering the attention of industry analysts due to its binding offtake agreements for its Brazilian project. At least four analysts have recommended the stock as a "Buy," recognizing the company's strong position and potential for growth in the lithium market.

Atlas Lithium Corp. (ATLX:NASDAQ), the only company with executed binding offtake agreements to advance its Minas Gerais lithium project towards production in Brazil's Lithium Valley, is also attracting significant attention from industry analysts who recognize the company’s unique position and potential for success.

The small-cap explorer and developer announced in March that it had 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, purchased US$30 million in common shares of Atlas at a 10% premium and also entered into an offtake agreement for the future purchase of lithium concentrate from Atlas over several years.

This comes after the company announced US$50 million in deals with two of the world's largest lithium chemical producers last December.

"ATLX is judiciously building a roster of strategic partners while simultaneously procuring funding for initial capital requirements at MGLP (Minas Gerais) as the project moves toward first production, which is targeted by year-end 2024," wrote Alliance Global Partners analyst Jake Sekelsky in an updated research note on April 2.

Technical Analyst Clive Maund rated ATLX a Strong Buy for all timeframes.

"In our view, the additional funding from the Mitsui agreement provides ATLX with a clear path to achieve initial production at the MGLP in late 2024," continued Sekelsky, who rated the stock a Buy with a US$55 per share target price. "Importantly, the processing facility is ~80% complete and is expected to be shipped to site in Brazil by the end of April."

The new plant's "compact, modular design" is being built off-site and will be transported in a semi-assembled state before being fully constructed in Brazil, according to the company.

Several of Atlas' lithium properties neighbor those of Sigma Lithium Corp. a producer with a market capitalization of approximately 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.

The Catalyst: 'REALLY BIG NEWS,' Technical Analyst Says

Atlas' stock jumped from US$14.92 to US$17.02 on high volume after the Mitsui news.

Technical Analyst Clive Maund wrote at the time that the agreement was "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."

Maund rated ATLX a Strong Buy for all timeframes.

Atlas "has been steadily progressing its site to production," noted H.C. Wainwright & Co. analyst Heiko F. Ihle.

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 chemical producers: Yahua, a lithium chemical supplier to Tesla, the largest electric vehicle (EV) producer globally, and Chengxin, a battery-grade lithium supplier to BYD, the world’s second-largest EV maker.

Yahua and Chengxin 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.

Steadily Progression to Production

Atlas "has been steadily progressing its site to production," noted H.C. Wainwright & Co. analyst Heiko F. Ihle in an updated note on April 1.

Mitsui's backing provides Atlas with the "immediate liquidity necessary for rapid development toward revenue generation following the production and sale of high-quality, low-cost, environmentally sustainable lithium concentrate."

Ihle rated the stock Buy with a US$40 per share target price.

He also said the two companies appeared to have grown their close relationship through due diligence visits and exchanges. "Looking ahead, we believe the investment and offtake agreement should yield an ongoing partnership between Mitsui and Atlas," the analyst wrote.

Ihle also pointed to further catalysts expected this year, including a maiden resource estimate (MRE) and a Definitive Feasibility Study (DFS).

Another analyst, Joe Reagor of Roth MKM, wrote in an April 1 note that the new deal was "an incremental positive" for Atlas, and rated the stock a Buy with a US$36 per share target price.

"It demonstrates further confidence in the company's project from the lithium battery industry," wrote Reagor, who agreed that future catalysts could be even more positive.

"We continue to believe the key catalyst for ATLX is likely to be the release of an initial resource estimate and subsequent financial study," Reagor noted.

Mitsui Sees Upside Potential

Lithium is a soft and silvery metal. It is playing an important part in the pivot to green energy in the rapidly growing fields of electric vehicle (EV) batteries and energy storage systems. But it also strengthens alloys, serves as a high-temperature lubricant, and treats bipolar patients.

Its market 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 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.

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Atlas Lithium Corp. (ATLX:NASDAQ)

*Share Structure as of 4/17/2024

Spodumene-based lithium extraction offers "lower capital costs and a shorter time from discovery to production in comparison to brine operations," noted Feeco International.

Atlas' expected shorter timeline to production was part of what attracted Mitsui to the company, Mitsui New Metals & Aluminum Division General Manager Akinobu Hashimoto said after the March announcement, Reuters reported.

"As Atlas owns more than 50 blocks in the valley, we see the upside potential," Hashimoto said.

Ownership and Share Structure

About 36% of Atlas Lithium is owned by management and insiders. About 13.5% of the shareholders are institutional. The rest, about 50.5%, is retail.

Other top shareholders include Waratah Capital Advisors Ltd. with 4.52%, Invesco Capital Management LLC with 2.48%, and Candace Shira Associates LLC with 1.47%, according to Reuters.

Its market cap is about US$178.77 million. It trades in a 52-week range of US$45 and US$11.80.

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Important Disclosures:

  1. 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.
  2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of
  3. Atlas Lithium Corp.
  4. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
  5.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

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Contributing Author Disclosures:

  1. Author Certification and Compensation: [Clive Maund of] is being compensated as an independent contractor by Street Smart, an affiliate of Streetwise Reports, for writing this article. Maund received his UK Technical Analysts’ Diploma in 1989.  The recommendations and opinions expressed in this content accurately reflect the personal, independent, and objective views of the author regarding any and all of the designated securities discussed. No part of the compensation received by the author was, is, or will be directly or indirectly related to the specific recommendations or views expressed Disclosures

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks cannot be  only be construed as a recommendation or solicitation to buy and sell securities.

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