As well as increasing the target from 30 cents, Sydney-based Foster has maintained the Speculative Buy rating it had previously placed on Piedmont.
The company has compiled a maiden resource of 16.19 million tonnes grading 1.12% lithium oxide for 182,000 tonnes for the project in North Carolina.
This is equivalent to 450,000 tonnes of lithium carbonate equivalent (LCE).
Foster analyst Mark Fichera said in an equity research report that the resource was at the upper end of Piedmont’s previous exploration target.
He said the resource was shallow and open-pittable, extending from surface to 200 metres depth, with an average depth of 150 metres.
Fichera said: “A spodumene SC6.0 price of US$750 per tonne was used to optimise the pit shell, which is below current spot prices and at upper end of consensus long-term forecasts.”
It is the first resource estimate completed in over 30 years in the historic Carolina Tin-Spodumene Belt.
The belt was the home to most of the world’s lithium production and processing from the 1950s until the 1980s.
Following is an extract from Foster’s report.
The majority of the resources (52%, or 8.5 million tonnes) was in the indicated category, which paves the way for the company to rapidly expedite a scoping study.
Piedmont also announced a new exploration target of 4.5 to 5.5 million tonnes at 1.1%-1.2% Li2O, in addition to the JORC resource.
The target is wholly within the Core property and includes direct extensions of the existing resource corridors.
Should the company be successful in converting the target, this would push the resource to over 20 million tonnes on the core property.
A scoping study, expected in Q3 of 2018, is the next major catalyst.
We expect the study to include financial metrics on the project such as operating and capital costs for mine, concentrator and conversion plant.
We anticipate it will highlight the attractive location of the project including availability of existing infrastructure and resources such as power, water, roads, rail, airport, local workforce and services, and favourable state permitting, labour costs, and taxes.
The Sunnyside property offers even more resource upside.
Drilling is underway at this 255-acre property and we envisage that this property could offer more resource potential should initial drill results prove promising.
Earnings and valuation:
We increase our valuation of PLL to $0.32/share (previously $0.30), following applying an updated average peer EV/resource tonne multiple of A$288/t on PLL’s resource and exploration target.
This multiple included a blend of both explorers, developers, and producers that are in the hard rock spodumene listed space in Australia and Canada.
We included the exploration target in our valuation to account for the additional resource potential at Piedmont, and a blend of producers in the multiple to account for the probability of PLL progressing Piedmont towards production.
We maintain our Speculative Buy on PLL, and increase our 12-month price target to $0.32/share (previously $0.30), based on our valuation.
While one can argue that PLL is trading fairly near the implied valuation from for explorers or those in studies ($0.23/share) we note two major factors provide a strong argument to PLL successfully transitioning to a producer.
First, the location of Piedmont project in the favourable jurisdiction of North Carolina, surrounding infrastructure, and proven project development experience of the Board suggests the company can relatively quickly progress project into production.
North Carolina’s relative economic advantages.
Therefore we deem it prudent to attribute a partial blend of the average producer multiple to reflect the potential to progress Piedmont towards production.
We expect the company to move rapidly into a pre-feasibility study on Piedmont post its scoping study, while also maintaining its permitting work, pilot scale metwork and resource drilling.
The company is targeting Q4 2019 for a final investment decision to mine, expecting that by then it would have the necessary approvals and DFS completed.
We also expect a by-products study, whereby PLL will examine the potential to commercially exploit mica, feldspar and quartz from Piedmont, which may contribute credits to the project.