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Anson Resources well positioned to benefit from increasing lithium demand: Arrowhead

Arrowhead Business and Investment Decisions has updated its coverage on Anson with a fair value of 28 cents in the high bracket scenario.
Supersaturated brine being collected and the flow rate tested
Supersaturated brine being collected and the flow rate tested

Anson Resources Ltd (ASX:ASN) is focused on the extraction of lithium from its Paradox Brine Project in the Paradox Basin, Utah, US.

The company recently intersected high-grade lithium brines from drilling at the Skyline Unit 1 well at Paradox.

Notably, the new assays include a lithium grade of 193.5 ppm which is 91% higher than the lithium grade of the Cane Creek 32-1 well brine used in test work to date.

READ: Anson Resources intersects lithium brines 91% higher than previous assays at US project

Arrowhead Business and Investment Decisions has updated its coverage on Anson with a fair value of 14 cents in the low bracket and 28 cents in the high bracket scenario (current share price: 7.4 cents).

Following is an extract from Arrowhead’s due diligence and valuation report on Anson:

Company Premiums

Potential Reserves: The addition of brine-bearing Clastic Zones to Anson’s portfolio has enhanced the company’s exploration potential. Horizons such as Clastic Zones 7, 9, 13, 21, 25, 27 and 43 are known to have brines.

Also, Clastic Zones 17, 19 and 29 were previously found to be super-saturated. Historically, Clastic Zone 17 has been assayed for lithium and lithium values of up to 339 ppm have been found.

The Clastic Zone 31 horizon has showed lithium values of up to 1,700 ppm, with an average of 500 ppm.

Strong Locational Advantage: The company’s key asset, the Paradox Brine Project, benefits from good infrastructure. It is located close to the market and the Tesla Gigafactory. The basin is well-connected through interstate highways and railways, along with gas and power lines.

Availability of Historical Data: There are some existing historical wells in the Paradox Basin. Apart from this, there is historic seismic data and local drill hole data available, which is a big advantage for Anson.

Experienced Management: The company has a good management team, which includes people with over 30 years of relevant and vast experience in the field of mining and exploration.

Part of a Growth Market: Since the company is into the extraction of lithium (a key input in battery manufacturing), the global shift towards cleaner energy and EVs is expected to boost demand from the battery market.

Further, China dominates EV manufacturing globally and Anson has already entered into MoUs with 3 Chinese companies - Link Data Technologies, Far East First New Energy and CBAK Power Battery for potential off-take agreements for the supply of lithium.

Thus, Anson is positioned well to benefit from the increasing lithium demand from tomorrow’s new energy and technology markets. Anson is, thus, poised to become a part of the battery supply chain in China.

Demand Drivers

The demand for lithium is increasing, given its growing importance in several industrial sectors – EVs, consumer electronics and the energy sector.

Lithium has numerous applications, from lubricating grease and glass fabrication, to glazes for ceramics, and batteries.

The metal is expected to continue to play an integral role in battery powered vehicles and other devices.

However, the lithium market is currently underdeveloped in comparison to other industrial commodities, with a few conglomerates controlling the market.

The supply of lithium is expected to be ramped up to meet the growing demand.

According to Deutsche Bank, the global lithium market will grow from 184,000 tonnes in 2015 to 535,000 tonnes LCE by 2025. The rise in demand will be driven by batteries for EVs and energy storage for wind and solar plants.

Increasing EV Penetration

Lithium is used in high-energy-density rechargeable lithium-ion batteries which power full-electric, plug-in hybrid and hybrid vehicles.

Due to the growth in EV technology, concerns over increased CO2 pollution and rising fuel costs from combustion engines, lithium has witnessed widespread use in EV batteries.

This market is primarily driven by the mass uptake of EV technology in China, where government subsidies are in place for both passenger EVs and commercial EVs (buses and small trucks).

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