San José Lithium Project: With 1.6 million tonnes of Lithium Carbonate Equivalent (LCE) in mineral resources, the San José Lithium Project is the second largest JORC defined hard-rock mineral resource in the EU and is strategically located to benefit from booming demand from the emerging gigafactories in the region.
Ownership: INF maintains 75% project ownership through wholly owned Spanish subsidiary Extremadura New Energies with a call option to acquire the balance of 25% and therefore move to 100% project ownership prior to the final investment decision. The exercise of the call option requires an upfront payment between €2m and €4m dependent on timing of acquisition. Considering the relatively low cost to exercise the option, we have assumed 100% project ownership in our valuation.
Politics & Strategy: regional political changes and a change of development strategy from open pit to underground were key in finding a pathway to unlock the project. Permitting: both the mining licence and Environmental Impact Assessment (EIA) application process were initiated in October 2022 and as of March 2023, the Exploration Permit over the San José area was granted representing a major milestone for the project, providing clarity and administrative process for the future submission of an Exploitation Concession Application (equivalent to a mining licence application in Australia). In parallel, the Regional Government of Extremadura has ratified the Lithium Decree-Law 5/2022 dismissing opposition to the project and mandating the requirement for all lithium minerals extracted to be processed in the region. Furthermore, the decree enables the accelerated administrative processing of projects, access to public funding, and categorisation of PREMIA (projects of regional interest) to facilitate expropriations that may be required. In May 2023, INF has received the finalised EIA Scoping Document response from the Regional Government establishing the preliminary conditions for the mining licence and environmental authorisations submissions planned for Q4 2023. INF recently secured key industrial zoned land designated for the Project’s lithium chemical conversion plant has secured an already industrially zoned leasehold for the life of the project as a minimum (see ASX Announcement 19 July 2023).
Project Benchmarking: we have undertaken some benchmarking with the following companies and projects: European Lithium (ASX:EUR, Wolfsberg, Austria), European Metals Holdings (ASX:EMH, Cinovec, Czech Republic), Ioneer (ASX:INR, Rhyolite Ridge, USA), Lepidico (ASX:LPD, Karibib, Namibia), Savannah Resources (AIM:SAV, Barosso, Portugal), Sibanye Stillwater (JSE:SSW, Keliber, Finland), Vulcan Energy (ASX:VUL, Zero Carbon, Germany), Zinnwald Lithium (AIM:ZNWD, Zinnwald, Germany). Beyond its mineral resource size, the scoping study dated Oct-21 indicates San José has the second-best capital intensity among the above listed peers. Other parameters: capital expenditure, operating costs and profitability, are in line with project peers.
Partnerships: INF has signed a binding MOU with Enalter for a photovoltaic, methane and green hydrogen project aligned with the San José project. INF has also signed a non-binding off-take MOU with LG Energy Solution for 10,000 tpa lithium hydroxide for a minimum of 5 years (ASX announcements 22 Jun & 21 Dec 2022). The granting of the exploration permit in March 2023 has generated increased interest from third parties for material offtakes volumes and strategic involvement in the project.
Proven Expertise: INF technical team includes engineers and chemists such as Jon Starink and Dr David Maree, who have a successful track record in developing and commissioning chemical plants for the production of lithium carbonate and lithium hydroxide.
Lithium market outlook: the sector has experienced a tremendous uplift in product prices over the last couple of years. The sustained demand for lithium products over the next decades should support high lithium prices. At this time, lithium prices and price forecasts remain well above the assumptions used in the development studies and financial modelling considered in our analysis.
News flow: Beyond the acceleration of on-the-ground evaluation and the update of development studies in H2 2023, the key catalysts include agreements with existing and new blue-chip partners to support the development of the project.
INF valuation: our sum of the parts valuation is supported by the current market valuation of lithium peers. With the assumed addition of 150 million shares issued for some additional development capital ($15m raised at $0.10/share), our company valuation amounts to A$210 m or $0.31 per share.
