Original-Research: Rock Tech Lithium Inc - von GBC AG

Einstufung von GBC AG zu Rock Tech Lithium Inc

Unternehmen: Rock Tech Lithium Inc
ISIN: CA77273P2017

Anlass der Studie: Research report (Anno)
Empfehlung: Buy
Kursziel: 4.05 CAD
Letzte Ratingänderung: 
Analyst: Marcel Goldmann, Cosmin Filker

Core asset Georgia Lake delivers the fuel for the e-mobility megatrend;
Georgia Lake deposit has rich lithium reserves and represents a promising
investment in the growth market of lithium; Holdings of 13.3 million tonnes
of lithium resources and thus the necessary amount for the economic
production of the raw material; Using the preliminary economic assessment
(PEA), another important step towards lithium mining was taken; PEA report
values the main area of the core project in Georgia Lake at around CAD
312.0 million (NPV) with an IRR of 62.2%
The current environment for Rock Tech is still very promising. Falling
lithium-ion battery prices, increased regulation in the automotive industry
(e-car sales quotas, higher emissions limits, etc.), pending bans on
conventional motor vehicles, planned departure in certain countries from
classic drive technology in motor vehicles, increasing environmental
protection (sustainability) and government subsidies are boosting demand
for electric vehicles and thus the demand for lithium, as vast quantities
of this metal are used in key individual components (batteries) in electric
The market for electric vehicles is a relatively young market and has
recently shown dynamic growth. We expect that the electric vehicle market
will continue its strong growth in the future and secure a significant
market share in the overall automobile market in the long term. Automobile
research institutes, such as the CAM, are acting on the assumption that
electric cars will account for around 25.0% to 40.0% of sales on the entire
automobile market in 2030. Against the backdrop of what we expect to be the
long-term establishment of electric mobility, we expect increased demand
for lithium from the automotive industry for many years to come.
However, the demand for lithium is not only influenced by the automobile
sector. Other growth markets, such as the e-bikes market and the energy
storage market require larger quantities of lithium for batteries. These
markets are also proven growth markets that have performed extremely
strongly in recent years. We also expect continued significant growth for
these sectors in the long term, which should, in parallel, also reflect in
strong demand for lithium. These new markets will therefore, in our view,
provide added impetus for lithium demand.
The increasing demand for lithium is also already being reflected in the
market price for lithium carbonate (the most used type of lithium). The
price has exploded between 2014 and today increasing by almost 200.0% to
around USD 14,000/tonne. Due to the continuing increase in demand for
lithium from various sectors and a continuing limited supply of lithium, we
expect the lithium price to remain at a very high level over the long term.
Due to the excellent conditions on the market and the attractive market
environment, Rock Tech has put suitable strategic measures in place to
benefit from this positive market trend in the area of lithium. Against
this background, Georgia Lake, which was purchased in 2009, was
significantly developed. In doing so, the historical resource estimates
were converted to NI-43-101-compliant resource estimates and were thus
confirmed or even substantially increased. In addition, other key steps,
such as the preparation of the PEA report, were taken towards lithium
Building on the expanded NI-compliant resource base totalling 13.3 million
tonnes (Li2O grade: 1.09%) a preliminary economic assessment (PEA) was
carried out. This assessment resulted in a valuation of the core asset
Georgia Lake at CAD 312.0 million (MPV) with an IRR of 62.2%.The results of
the analysis therefore show great economic potential for the Georgia Lake
area and thus attractive potential returns for investors.
Rock Tech's core business is to further develop promising commodity assets
(in particular in lithium) that are still at an early stage, acquire them
and promote them further. In our opinion, the company's primary aim is not
to mine commodities themselves, although it can be an option in individual
cases, in order to achieve the best shareholder return.
Based on the current 13.3 million tonnes in NI-compliant lithium resources
and the excellent framework conditions (e-mobility megatrend, strong
increase in the price of lithium), according to our DCF model, we regard
the current fair value of Rock Tech Lithium Inc. to be CAD 4.05 or EUR 2.71
(previously: CAD 4.00 or EUR 2.56). The change in stock price target
results from slight dilution effects and an adjusted cost of capital due to
a change in risk-free interest rates.
Based on the current price level, there is still great share price
potential and thus the BUY rating remains unchanged. In light of the
burgeoning e-mobility sector and the further development of the core asset
Georgia Lake towards lithium production, we see a good chance that Rock
Tech could be acquired by a company from the direct or indirect e-mobility
sector (battery corporation, commodity corporation or automobile
corporation) in the medium term or start cooperation with such a company.

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Datum (Zeitpunkt)Fertigstellung: 13.12.18 (10:19 Uhr)   
Datum (Zeitpunkt) erste Weitergabe: 13.12.18 (11:00 Uhr)

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