Company's Lithium Processing Plant Nearly Ready to Ship

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Atlas Lithium Corp. (ATLX:NASDAQ) has team members on the ground in South Africa, overseeing the weighing and packaging of all components of the company's modular dense media separation (DMS) lithium processing plant in preparation for transcontinental shipment to Brazil. So far, 48 containers of an estimated 100 have been readied.

"Our direct involvement ensures that every detail is accounted for as we ship it," said Brian Talbot, founder and director of RTEK International DMCC, the company doing the work.

Atlas representatives also visited the South African facilities where some remaining parts of the processing plant are still being fabricated, such as effluent components and conveyors.

Atlas Lithium's plant, the first of its kind for Brazil, uses a modularized and optimized version of the long-used and proven DMS method of processing lithium. Using a heavy liquid medium, several times denser than water, materials are efficiently separated by density, for example, heavier lithium minerals are isolated from lighter waste materials.

The plant's modular design "streamlines transportation, installation and commissioning while its significantly reduced height, weight and overall physical footprint make it an environmentally-friendly solution," wrote H.C. Wainwright & Co. analyst Heiko Ihle in a July 9 research report. Further, the plant's reduced water requirement sets a new standard for water conservation in lithium production, the release noted.

"Atlas Lithium's modular plant represents a significant step for Brazil's lithium industry," Talbot said.

Moving Toward Production

U.S.-based Atlas Lithium Corp. is a mineral explorer-developer that aims to become "the mineral resources company for the green energy revolution," according to its website.

Currently, Atlas is aiming to transition from exploration to lithium concentrate production with its flagship Neves Project hard-rock lithium project in Brazil's state of Minas Gerais. "We remain confident that the firm can start recording revenue from spodumene at Das Neves once production begins," Ihle commented on July 9.

The Neves Project, comprising 85 mineral rights over 468 square kilometers (468 sq km), is one of the largest exploration projects for lithium and other battery minerals in Brazil, a premier mining jurisdiction. The property is located mostly the country's Eastern Pegmatitic Province, known for its hard rock formations, or pegmatites, containing lithium-bearing minerals like spodumene and petalite, according to the Brazilian Geological Survey.

Minas Gerais is also home to Sigma Lithium Corp.'s (SGML:TSXV; SGML:US) producing Grota do Cirilo project with a Measured and Indicated resource of 94,300,000 tons (94.3 Mt) of 1.4% lithium carbonate equivalent (LCE) and an Inferred resource of 14.6 Mt of 1.37% LCE, per the company's website.

"We highlight Atlas' geographical proximity to Sigma's operations and our view that Das Neves shares similar geological characteristics," Ihle wrote in 2023.

Earlier this year, Atlas signed an offtake agreement with Mitsui & Co. Ltd. (MITSY:NASDAQ) for future production from the Neves Project, Ihle explained in an April 1 research report. Mitsui invested US$30 million ($30M) and will get 15,000 tons (15 Kt) of lithium concentrate from phase one of production and 60 Kt annually for five years from phase two.

In another recent development, according to Ihle last month, Atlas more than doubled its lithium exploration portfolio in Brazil to about 539 sq km.

"Most of the new claims are located in the Doce River and Mucuri [River] valleys, which we view as an exciting new lithium jurisdiction in Brazil that has been underexplored thus far," Ihle said in the research report.

Additionally, Atlas owns the Northeastern Brazil exploration lithium project encompassing seven mineral rights that span about 71 sq km in the states of Paraíba, Rio Grande do Norte and Tocantins.

Other non-lithium assets are a 59% interest in Apollo Resources Corp., a private company developing its Rio Piracicaba iron project in Brazil's Iron Quadrangle, and a 28% stake in Jupiter Gold Corp., a public company with exploration- and development-stage gold projects in Brazil.

Why This Sector

Lithium is essential to the global green energy transition and thus is considered a critical metal around the world. Lithium also is used in electronics, medicine and other industries.

As such, global demand for lithium is expected to maintain the steady climb it commenced in 2020 to at least 2035, Statista data show, reaching 3,829,000 metric tons of LCE from 917,000 metric tons in 2023.

This increasing demand will continue to spur growth in the global lithium market, which is projected to hit US$6.4 billion ($6.4B) in value by 2028 from US$2.5B in 2023, according to Markets and Markets. This change reflects a 20.4% compound annual growth rate.

Electric vehicles (EVs) and battery storage primarily will fuel future growth of the lithium market, Marin Katusa of Katusa Research wrote recently. He pointed out that all major electric vehicle batteries require lithium, about 1.55 pounds per kilowatt hour of battery capacity, on average. He also noted that global battery cell manufacturing capacity is expected to hit 7.2 terawatt hours in 2030, which is more than triple its capacity in 2023.

"I think the data speaks for itself that there's more growth and opportunity on the horizon," Katusa wrote.

Another major catalyst, noted Katusa, "for the U.S.-friendly lithium sector" is the country's policy regarding foreign entities of concern (FEOCs), entities owned or controlled by, or subject to the jurisdiction of, certain countries, specifically China, North Korea, Russia and Iran today. This mandates that EVs no longer qualify for the EV tax credit if any of the vehicle's battery components came from an FEOC (as of 2024) or if any of the applicable critical minerals came from an FOEC (starting in 2025).

Despite increasing demand and all stages of new lithium projects coming online, the global lithium market is headed toward a supply deficit, happening as soon as 2025, Jacob White with Sprott Asset Management told Stockhead on August 9.

Today's lithium sector has been underperforming for about two years, according to a recent Fundamental Research Corp. (FRC), with the price of the metal down 66% year over year. Compared to the five-year average price of US$21,000 per ton, it is now about $10,000 per ton. The current price, lower than what most large-scale lithium development projects need to break even, is not sustainable, the article noted. Yet manufacturers of electric vehicles, batteries and battery storage systems are looking for stable, long-term supply sources of the metal.

"While lithium prices have dropped significantly this year, they are expected to rise again," the FRC analyst wrote.

It was announced earlier this month that Latin Resources Limited, also located in Brazil’s Lithium Valley and in relative proximity to the  Atlas Lithium’s Neves project, agreed to be acquired by Pilbara Minerals Ltd. (PLS:ASX), the most recent of several mergers and acquisitions deals in the lithium sector so far this year. This transaction could reignite interest in the lithium space, according to FRC.

White indicated lithium prices may have hit their bottom, good news for investors in companies throughout the supply chain.

Analysts See 150%-Plus Upside

Both analysts, ROTH's Reagor, and H.C. Wainwright's Ihle, have a Buy rating on Atlas.

Reagor's price target on the company implies a 159% return from its price at the time of the report.

Ihle raised his target price on Atlas a bit last month, and the new figure reflects a 316% gain.

"This change acknowledges our view that management's recent advancements have effectively derisked the Neves project over the last few months," Ihle wrote.

Ownership and Share Structure

About 36% of Atlas Lithium is owned by management and insiders. About 13.5% of the shareholders are institutional. The rest, about 50.5%, is retail.

Other top shareholders include Waratah Capital Advisors Ltd. with 4.47%, Mitsui & Co. Ltd. with 12.64%, and Candace Shira Associates LLC with 1.44%, according to Reuters.

Its market cap is about US$166.52 million. It trades in a 52-week range of US$34 and US$9.30.