The Baixa Grande project, formerly known as the Salinas project before its total resource tonnage increased by 32%, "is proving to be an attractive long-term production option" for Lithium Ionic Corp., Canaccord Capital Markets Analyst Katie Lachapelle said in an updated research note on January 14.
On that day, the company announced an updated mineral resource for the project, increasing the Measured and Indicated category to 6.52 Mt (metric tons) at 1.11% Li2O (an increase of 11%) increasing the Inferred category to 12.90 Mt at 0.96% Li2O (an increase of 45%). The updated MRE incorporates data from 35,734 meters of drilling.
"Management noted that significant potential remains to add additional Li-bearing mineralization at Baixa Grande," wrote the analyst. She continued to rate the stock a Speculative Buy with a CA$2.50 per share target price. "The deposit remains open at depth and along strike."
Baixa Grande is adjacent to Latin Resources Colina deposit (77.7 Mt at 1.24%). Pilbara Minerals announced the acquisition of Latin Resources in August 2024 for US$369.4 million.
"In our view, Pilbara’s acquisition underscores the quality and global competitiveness of this district," Lachapelle wrote. "Our take — positive long-term growth potential. In our view, the Baixa Grande Project is proving to be an attractive long-term production option for LTH. The asset could also be monetized via sale."
Bandeira Project Is Top Priority
However, Lithium Ionic’s top priority right now is the advancement of the Bandeira Project toward production (41.9 Mt at 1.35% Li2O), the analyst wrote. On January 8, LTH said it expected imminent approval of a license allowing construction to begin. The application
was submitted in late 2023 and is “in the final stages of approvals, with all information
requests satisfied by the company.”
The next major catalyst will be finalization of project financing, Lachapelle wrote. In November, LTH secured a non-binding Letter of Interest (LOI) for up to US$266 million in debt financing for Bandeira, covering 100% of the projected capital cost.
"The due diligence process with EXIM is underway, and LTH is aiming to finalize a definitive project financing package that will support the start of construction in the second half of 2025," she noted. "In the meantime, we view LTH as well funded. We estimate that LTH has ~C$24 million in cash on hand, enough to advance Bandeira to FID and enough to potentially start some early works construction."
Lithium Ionic is also advancing potential offtake discussions, the firm believes.
Debt Financing Could Reduce Dilution
Lachapelle's target price is based on 1.0x NAV. "While our live model debt and equity assumptions remain unchanged (and thus our target price), if we were to incorporate full receipt of the EXIM debt, this would materially reduce anticipated dilution (we currently assume that ~50% of CapEx is funded with equity to be conservative)," Lachapelle wrote.
Upcoming catalyst for the company include final approval for the needed Bandeira license, an updated mineral resource at Bandeira in early 2025, potential offtake agreements or M&A, and confirmation of the EXIM debt, she said.
