On Tuesday, Standard Lithium Ltd (CVE:SLL) shares surged 8% after reporting positive results from a preliminary economic assessment (PEA) of its South-West Arkansas Lithium project.
The company said it expects a pre-tax net present value of $2.83 billion discounted at 8% and an IRR of 40.5%. As a result, it estimates an after-tax NPV of $1.97 billion at an 8% discount rate and 32.1% IRR.
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The company also projects increased on-site resources of 1.19 million metric tons of lithium carbonate and forecasts a CapEx of about $870 million.
Lithium also said its PEA assumes the production of battery-quality lithium hydroxide averaging 30,000 metric tons annually, over a 20-year period.
Should you bet on Lithium’s exciting project?
As of this writing, Standard Lithium is valued at a market cap of $1.51 billion. Therefore, the current stock price values the company below the after-tax NPV of its South-West Arkansas Lithium project.
Therefore, when you consider its Mojave project in Bristol Lake, the stock could be substantially undervalued.
Therefore, although shares have spiked more than 430% over the last 12 months, it may not be too late to buy.
Can the bull run continue?
Technically, Standard Lithium shares appear to be trading within an ascending channel formation in the intraday chart. As a result, the stock has surged closer to the overbought conditions of the 14-day RSI.
However, shares seem to have more room to run before retesting recent highs of about $9.10.
Therefore, investors could target extended gains at about $9.10, while $7.63 and $6.78 are crucial support zones.
Time to buy Standard Lithium stock?
In summary, although Lithium shares have surged nearly 260% this year, the stock still has room left to run before crossing to overbought conditions. Moreover, the company;’s current market cap is below the after-tax net present value of its South-West Arkansas project.
Therefore, with the Mojave project not even accounted for in the preliminary economic assessment report, Standard Lithium could be more valuable than its present market cap.
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