Analysts at Noble Capital Corp reiterated an 'Outperform' rating and US$3.10 price target for Cypress Development Corp (TSX-V:CYP, OTCQX:CYDVF) after the firm hosted Cypress management for a series of well-attended investor meetings in Kansas City and St Louis.
In a note to clients, the analysts highlighted the fact that lithium extraction recently began at the company's pilot plant with acid leaching a slurry of lithium-bearing claystone, and extractions of lithium in leaching are running between 83% and 85%.
The Noble analysts also noted that the direct lithium extraction portion of the plant is recovering 99.5% lithium, and Cypress has delivered concentrated lithium chloride solution from the pilot plant to a pair of laboratories to further treat the solutions in order to produce high-grade lithium carbonate and lithium hydroxide. Results are expected this month, they added.
READ: Cypress Development maintains ‘Buy’ rating from Couloir Capital as it makes progress with Clayton Valley project
“We expect a catalyst-rich second half of 2022,” Noble analysts said. “In addition to receiving results from the laboratories shortly, we think Cypress is moving quickly toward affirming the commercial viability of producing battery-grade lithium product from Nevada claystone. Our expectations for an economically compelling feasibility study are rising and we think the stock price represents an attractive entry point for investors.”
Cypress has also completed a sonic drill program to validate the mine plan resource model, and a geotechnical program to test the foundations of the tailing facility and plant site is expected to conclude in August, the analysts noted.
The company has said it expects to put out a feasibility study later in 2022, which the analysts believe will differ from the preliminary feasibility study in several respects.
“First, the leaching process will be based on using hydrochloric acid instead of sulfuric acid,” the Noble analysts said. “Second, the project could rely on renewable solar or geothermal power instead of external power. Third, the base case pricing assumption for lithium carbonate equivalent will likely be higher than the US$9,500 per tonne used in the PFS which is expected to more than offset expected increases in capital costs and operating expense. We currently assume US$19,500 per tonne in our valuation although that figure could move higher based on recent pricing trends.”
Shares of Cypress Development traded at around US$1.00 on Monday morning.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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