This Lithium Explorer Could Be Undervalued By Up To 90%
Nevada is home to some of the world’s richest mineral resources. However, when you think of Nevada you probably think of gold, not lithium. Well it might be time to think again – Cypress Development just released a maiden resource estimate at its Clayton Valley, Nevada lithium project that will put Nevada on the map for lithium for a long time to come.
This resource estimate stands out because it shows a total mineral resource of 6.4 million tonnes of lithium carbonate equivalent (LCE) grading nearly 900 ppm Li (parts per million lithium). This is a large, high grade lithium resource located in one of the best jurisdictions and geographic locations that a lithium resource could possibly be located. To put the size of Cypress Development’s Clayton Valley Project into perspective, using a US$11,000/tonne LCE price and an 80% recovery (as outlined in the CYP resource estimate) the total market value of the total amount of lithium defined in Cypress’ resource estimate is more than US$56 billion. While there will be many factors that will greatly reduce the net present value of that figure, it’s still a tremendously valuable resource for a company that currently has a C$20 million market cap.
Another aspect that many investors might be overlooking is that Cypress has favorable mineralogy which means that conventional recovery methods can produce high-purity lithium carbonate. Additional leach testing is currently being conducted by Hazen Research Inc, and preliminary results have confirmed high lithium extractions for new mineral zones. Because the Clayton Valley claystones at Cypress’ Project are amenable to conventional recovery methods, Cypress may be able to fast-track production without having to do a pilot plant – this potential shortcut will save Cypress millions of dollars and up to 24 months of construction and project development time.
The situation is fairly straightforward as Cypress begins to move towards its maiden PEA before the end of the year:
More metallurgy testing with updates throughout the summer.
Prepare maiden PEA with objective of publishing PEA during Q4 2018.
Infill drilling to upgrade the inferred portion (3.683 million tonnes) of the resource to the indicated category – Cypress believes that it can upgrade the inferred portion to the indicated category with 30 additional drill holes.
At its recent share price of C$.30 Cypress has a C$17.5 million market cap – CYP’s current market cap is 1/10th of lithium development peer Bacanora Minerals (TSX-V:BCN), which has a C$187 million market cap. Bacanora’s clay-held lithium project is at the BFS stage (bankable feasibility study) and it is slightly larger than CYP’s project, however, the valuation gap is simply enormous. Cypress is in a superior location/jurisdiction (Nevada) compared to Bacanora’s project (Mexico) and CYP shareholders can look forward to CYP shares bridging the current valuation gap as the company advances towards the BFS stage over the next year (it’s quite possible that Cypress could be in the bankable feasibility stage by the 2nd half of 2019). Proving the value of the project’s mineralogy will be a huge step towards producing a positive PEA with compelling project economics. Buying near C$.30 (previous resistance and 50% retracement of February-April rally) following the “selling on the news” after the resource estimate announcement might be an attractive entry point as Cypress embarks upon what could be the most critical year and a half in the company’s history:
CYP.V (1 Year)
Disclosure: Author is long CYP shares at time of publishing and may buy or sell at any time without notice. Do your own due diligence, it’s your money and your responsibility.
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