- Canaccord slaps Buy rating on Argosy Minerals with a big price target
- Argosy could rise on the back of its Rincon Lithium Project in Argentina
- The company recently received EIA approval, allowing it to transition into development phase
Canaccord Genuity has slapped a Buy rating on Argosy Minerals (ASX:AGY) with a price target of $0.27 (versus the current share price of $0.14).
Argosy is a $190m market-capped lithium development company progressing the Rincon Lithium Project in Argentina. It also owns the Tonopah early stage lithium prospect in Nevada, US.
Earlier this month, Argosy announced that the Government of Salta Province in Argentina has approved the company’s Environmental Impact Assessment (EIA) for the development of a 10ktpa battery grade lithium carbonate expansion at its 77.5%-owned Rincon Lithium Project.
This expansion is expected to bring the total capacity of the project to 12ktpa LCE (lithium carbonate equivalent).
“The approval de-risks Rincon, in our view, and shores up the development timeline,” noted Canaccord. “We believe given the long- term nature of the project, debt will become available to the company.”
AGY has already engaged service providers in anticipation of receiving approval of the EIA, so that it can transition into the development phase.
Following the approval, the company will now look to progress the pre-development engineering works for the 10ktpa expansion in preparation for an FID (final investment decision).
Dynamic modelling two scenarios
On 15 January, AGY announced that it had upgraded its Mineral Resource Estimate by 180% at the Rincon Project to 687kt LCE @ 329mg/l (from 245kt LCE @ 325mg/l), with 606kt of the Resource now sitting within the Indicated category.
Following this upgrade, the company undertook additional dynamic modelling works aimed at simulating different brine abstraction scenarios with varying pumping rates and borefield configurations.
The modelling focussed on two main scenarios: 1) 12ktpa of LCE for a period of 42 years; and 2) an expanded operation of 24ktpa LCE for 22 years.
“The company believes that the increase in capex related to upscaling to a 24ktpa operation is either more efficient or proportional, such that when combined with an extended mine life, does not materially change project economics,” said Canaccord.
2024 a critical year for the 2,000ktpa plant
Meanwhile, AGY completed its 2,000ktpa plant in Argentina in December 2022, and has since been working through a number of issues surrounding the plant.
AGY has kept the market up to date with progress at the plant on a monthly basis, with the primary focus around the filtration circuit, continuous operations and equipment reliability.
“We continue to view the 2,000ktpa plant as a valuable part of AGY, with learnings able to be applied to the 10ktpa expansion, and ultimately for the plant to generate positive cashflow,” said Canaccord.
However, Canaccord believes 2,000ktpa plant highlights the difficulty in ramping up brine operations.
“AGY will need to build production momentum if it is to prove its process and attract a partner for the 10ktpa expansion, in our view.”
In its April update, AGY highlighted it anticipates achieving continuous production in the coming months, and has begun product testing (with existing production) with potential offtake partners.
“Our price target is based on a NPV 10% for Rincon, which is risked according to project stage,” said Canaccord.
“We use US$22,500/t LC lithium carbonate price, AUD/USD currency of 0.75, and 10% discount rate in our NPV calculation.”
Argosy share price today: