Lithium MacMurray D. Whale, PhD., P.Eng. LSC Lithium Corp ... › _resources › pdf › BatteryValueC… · Lithium Lithium carbonate spot prices dipped slightly coming in at a range

MacMurray D. Whale, PhD., P.Eng . , (416) 943-6708, [email protected]

Mark Chiang, Associate , (416) 943-6397, [email protected]

MORNING MEETING NOTES SEPTEMBER 26, 2018

During the past twenty-four months, Cormark Securities Inc., either on its own or as a syndicate member, participated in the underwriting of securities and/or provided financial

advice regarding the stock market insight and financial analysis regarding potential transactions for these companies.

Our disclosure statements are located at the end of this report

vs

Industrial Technology

Weekly Highlights In The Battery Value Chain

Weekly Highlights in the Battery Value Chain is published

each week to provide a snapshot of stock activity,

commodity markets, industry news and government policy

related to the adoption of lithium ion batteries as well as

the supply and manufacture of related materials and

components.

Unless otherwise denoted, all figures shown in US$

Highlights:

Cormark’s Quant/Technical analyst highlighted earlier this week that lithium stocks have started to “hook back up,” noting that the Global X Lithium & Battery ETF has given a weekly momentum buy signal after a 25.3% drop off the January high. The ETF is oddly skewed to FMC, but the shift in sentiment is quite broad. The negative news so far in 2018 appears to be losing its impact on investors and along with signs of more stable spot prices, we expect a strong performance from the stocks this fall. As we note in today’s Weekly, demand signs are still relatively good with OEMs making their EV plans more explicit. Interestingly, though the majors have rallied in September they are still at 10-year average multiples, the EV/ESS theme remains stronger than it has for most of that 10-year period, suggesting more upside ahead.

This Week’s Top Headlines:

Ganfeng Signs Supply Agreements With LG Chem And Tesla

Advantage Lithium Files PEA On SEDAR

Saudi Fund To Invest $1 BB In EV Startup

Portugal To Commence Tender Of Lithium Licenses

Volkswagen To Build EV Factory In North America

Porsche To Remove Diesel Engine Option On Vehicles

Recent Cormark Battery-Related Research:

Date Company Headline

6-Sept Sigma Lithium Resources Corp.

Emerging High Grade, Large Crystal Lithium Concentrate Producer

14-Aug Lithium Americas Strategic Investment With Ganfeng Lithium

24-Jul Nemaska Lithium Project Construction And Timeline Update

20-Jul Neo Lithium Significant Resource Increase For 3Q

6-Jul Cobalt 27 Acquires Cobalt Stream On Voisey’s Bay

22-Jun Lithium Americas Thacker Pass PFS Begins Unlocking Value

19-Jun Neo Lithium Drill Results Point To Larger Resource

30-May Olaroz-Cauchari Basin: Portfolio Approach

24-May Cobalt 27 Announces First Streaming Deal

18-May Implications Of Tianqi’s Stake In SQM

23-Apr Highlights From Battery Materials 2018

Lithium

Advantage Lithium Corp Buy 0.68 1.85 172%

♦ Lithium Americas Corp Buy 6.16 13.75 123%

♦ LSC Lithium Corp Buy(S) 0.40 1.95 388%

♦ Neo Lithium Corp Buy 1.12 3.35 199%

♦ Nemaska Lithium Inc Buy 0.82 2.00 144%

Orocobre Ltd Buy 4.04 6.25 55%

♦ Sigma Lithium Resources CorpBuy 2.29 4.00 75%

Cobalt

♦ Fortune Minerals Ltd Buy(S) 0.11 0.40 281%

♦ Cobalt 27 Capital Corp Buy 6.39 16.75 162%

Graphite

♦ Mason Graphite Inc Buy 1.10 2.75 150%

Company Rec.

Share

Price

(C$)

Target

Price

(C$)

12-

Mth

Rtrn

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MacMurray D. Whale, Ph.D. , P.Eng. , (416) 943-6708, [email protected]




Coverage News

Advantage Lithium Corp. AAL-TSXV (Buy, C$1.85) Event: PEA Released Impact: Positive

Files PEA On SEDAR – September 25: Following summary results announced on August 14, Advantage has filed their PEA on SEDAR which supports their development plans at the 20 ktpa capacity lithium carbonate plant at its Cauchari JV project in Argentina. Key highlights include: operating costs of US$3,667/t of lithium carbonate, US$830 MM after-tax NPV at 8% discount rate and IRR of 24%, and a mine life of 25 years including a 3-year ramp up for 20 ktpa production. The US$830 MM NPV is an updated number that was revised higher since the initial announcement in August to reflect the improving tax regime in Argentina.

News From Other Producers/Developers

Ganfeng Lithium, 002460-Shenzen (Not Rated) Event: Supply Agreement Impact: Positive

Ganfeng To Almost Double Supply To LG Chem – September 20: Under a new contract, Ganfeng will extend their offtake agreement by three years with LG Chem to 2025. Ganfeng will supply an additional 45,000 tonnes of battery-grade lithium carbonate and hydroxide from 2019 to 2025. Recall that the initial deal on August 14 was for 47,600 tonnes of lithium hydroxide from 2019 to 2022. Both contracts have fixed volume specifications, but the pricing will be adjusted according to market conditions.

Ganfeng Signs Deal With Tesla – September 21: Last Friday, Ganfeng signed a three-year supply contract with Tesla just a day after announcing a new contract with LG Chem. Ganfeng will supply 20% of their lithium hydroxide production to Tesla over a three-year period which runs from January 2018 to December 2020 with an option to extend the contract for three years.

Since September 17, Ganfeng’s stock has risen ~18% which has sparked a rally in other lithium stocks as these deals provide a strong indication for lithium demand as EV battery manufacturing continues to ramp up. Lithium Americas, which is now a strategic partner with Ganfeng has also seen their stock rise significantly as they are up ~20% since last week.

Montero Mining & Exploration, MON-TSXV (Not Rated) Event: Lithium MOU Impact: Positive

Montero Signs Lithium MOU – September 25: Montero has signed a non-binding Memorandum of Understanding (MOU) with Jiang Xi Yun Lithium Materials of China for the joint cooperation and development of lithium production in Africa. Jiang Xi Yun processes and manufactures lithium carbonate and lithium iron phosphate products for the Chinese battery market and aims to be a major supplier of lithium. The MOU may involve a long-term offtake agreement with production coming from Namibia and the opportunity for Montero to invest in Jiang Xi Yun’s facilities in China. Montero currently has three exploration and development projects in Namibia and is currently targeting NI 43-101 compliant resources and the exploration of additional lithium targets.





Industry News

Lucid Motors, Private (Not Rated) Event: EV Investments Impact: Positive

Saudi Fund Backs EV Startup Weeks After Talks With Tesla – September 17: Just weeks after Tesla dropped its consideration of taking the company public with the help of the Saudi Arabia sovereign fund, Lucid Motors, an EV startup announced an investment. The sovereign wealth fund will put $1 BB into Lucid to fund the development of their EV production facility for the 2020 commercial launch of its first EV. The investment comes two years after the unveiling of a prototype in 2016 and a number of failed attempts at securing financing. Lucid’s factory is to be built in Arizona.

Volkswagen AG, VOWG-Xetra (Not Rated) Event 1: EV Introductions Impact: Positive Event 2: EV Push Impact: Positive

To Build EV Factory In North America – September 20: VW announced last week as part of its EV roll out a new factory located in North America by 2022. No planning has yet begun, so a city was not disclosed. Interestingly, VW plans to have 16 EV production plants by 2022, requiring $40 BB in investment. Most of these plants are expected to be in China. The Zwikau plant in Germany is being retooled to produce only EVs with the goal of 330,000 EVs per year production capacity by 2020.

Porsche To Cease Production Of Diesels – September 20: As VW continues to rehabilitate its reputation post the diesel emissions scandals in Germany, Porsche announced that it will not offer diesel engines as an option on its vehicles. Porsche has planned a 6 BB euro investment in electrified technology by 2022. Porsche’s first all-electric vehicle, the Taycan, will be available in 2019 and is expected to be a major part of taking EVs to 50% of the brand’s sales annually.

Event: EV Competition Impact: Positive

German Auto OEMs Up The Competition With Tesla – September 23: Following up on the plans announced in the summer of 2017, the German automakers last week began to announce more specific details on their EV offerings. The focus is clearly beginning at the high end of the market, as expected, as the OEMs aim clearly at Tesla. Audi introduced its E-Tron, while BMW promotes its iNext and Mercedes has introduced the EQC. These carmakers are aiming to invest €40 BB in battery-powered vehicles over the next three years.

Note that with a market share of around 8% in Germany, but with 80% of the global premium car market, the move into EVs is a major development for EV demand outside of China. Audi has indicated that it expects EVs will account for a third of its sales by 2025.

Event: Lithium Licenses Impact: Positive

Portugal To Initiate Lithium Exploration Licenses Tender – September 25: By the end of the year, Portugal plans to launch a tender of lithium exploration licenses as they pursue a plan to become Europe’s top supplier of lithium for EV batteries. Portugal is Europe’s largest lithium producer (6th overall in the world), but their current miners sell mainly to the ceramics industry and have only now begun to transition to the lithium demand for EVs. Last year, a government study identified 2,500 square km of area that is likely to contain lithium-bearing minerals with 11 areas in central and northern Portugal. The potential investment in five of the most attractive areas is estimated to be $3.9 BB and so far, the government has received more than 40 prospecting applications with interest coming from Australia, Canada, and the US.

The majority of battery supply currently comes from Asia using concentrates sold by miners in countries such as Chile and Australia. Currently, Europe does not have any facilities for the purpose of refining lithium to a battery-grade level and there is no large-scale battery production in operation for EVs with some companies only having recently committed to such plans (Sweden’s Northvolt and Germany’s TerraE).





Commodity Prices

Lithium Lithium carbonate spot prices dipped slightly coming in at a range of 78,000 – 83,000 RMB (US$11,365 – US$12,093) per tonne versus 79,000 – 85,000 RMB (US$11,518 – US$12,392) per tonne last week. Spot prices for lithium hydroxide in China has again remained flat coming in at 122,000 – 127,000 RMB (US$17,776 – US$18,504) per tonne with the difference in US dollar pricing coming from FX changes. According to Metal Bulletin, thin buying activity and sluggish demand for lithium carbonate and lithium hydroxide in China’s spot market continue to keep prices low. Referring to a quote from a consumer in the market, many downstream buyers are “unwilling to stock more material for fear of further price decreases but we plan to purchase again after the Mid-Autumn holiday or the National Day holiday”.

Refer to Figure 9 to see our lithium spot and contract price charts.

Cobalt Note that our cobalt price charts only show data from the LME, as Metal Bulletin instituted an extremely high subscription price for its quotes. LME cobalt prices continue to hover near $28/lb which is largely unchanged since last week. Prices seem to have stabilized at these levels since falling to $25/lb at the beginning of August. Refer to Figure 11 for our updated cobalt price charts.

MacMurray D. Whale, Ph.D. , P.Eng . , (416) 943-6708, [email protected]



During the past twenty-four months, Cormark Securities Inc., either on its own or as a syndicate member, participated in the underwriting of securities and/or provided financial advice regarding the stock market insight and financial analysis regarding potential transactions for these companies


Figure 1: Stocks Under Coverage

Source: Company reports, Thomson Eikon, Cormark Securities

Figure 2: Aggregate Stock Performance


Capitalization Current Valuation

High

($)

Low

($)Phase 1 Phase 2 Other(s) Cash

Opt. &

WrtsDebt

Lithium

Advantage Lithium Corp Buy C$0.68 C$1.85 172% C$107 C$1.42 C$0.40 387.7 30.7 26.4 - C$445 188 C$1.85 37%

♦ Lithium Americas Corp Buy C$6.16 C$13.75 123% C$546 C$14.06 C$4.58 575.7 345.7 408.9 73.5 20.1 - C$1,881 92 C$20.45 30%

♦ LSC Lithium Corp Buy(S) C$0.40 C$1.95 388% C$57 C$1.72 C$0.39 409.3 - 197.6 27.0 20.4 - C$839 354 C$2.37 17%

♦ Neo Lithium Corp Buy C$1.12 C$3.35 199% C$132 C$2.75 C$0.85 968.2 47.7 20.3 0.8 C$1,370 328 C$4.18 27%

♦ Nemaska Lithium Inc Buy C$0.82 C$2.00 144% C$694 C$2.44 C$0.60 C$1,847 C$480.2 C$1.8 C$(449) C$1,880 855 C$2.00 41%

Orocobre Ltd Buy C$4.04 C$6.25 55% C$1,053 C$7.42 C$3.58 449.1 331.2 139.3 336.9 (100.0) C$1,157 262 C$5.67 71%

♦ Sigma Lithium Resources CorpBuy C$2.29 C$4.00 75% C$153 C$2.40 C$0.95 321.2 72.0 53.1 0.1 (30.8) C$416 83 C$5.00 46%

Cobalt

♦ Fortune Minerals Ltd Buy(S) C$0.11 C$0.40 281% C$36 C$0.38 C$0.10 559.4 7.5 8.3 (6.6) C$569 1,052 C$0.54 19%

♦ Cobalt 27 Capital Corp Buy C$6.39 C$16.75 162% C$542 C$14.00 C$5.73 C$1,544 C$0.0 C$(90) C$1,451 84 C$17.30 37%

Graphite

♦ Mason Graphite Inc Buy C$1.10 C$2.75 150% C$150 C$3.15 C$0.91 285.8 92.7 5.7 (8.4) C$376 176 C$1.92 57%

Note: EV does not include cash from options and warrants. Cash may include amounts from projected equity raises on company specific basis

Mkt Cap

($ MM)Company

Share

Price

($)

Target

Price

($)

12-Mth

ReturnRec.

52-Week

NAV

($MM)

Val.

Shrs

(MM)

NAVPS

($) P/NAV

Mining Assets ($ MM) Financ'l Assets ($ MM)

-80.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

9-17 10-17 11-17 12-17 1-18 2-18 3-18 4-18 5-18 6-18 7-18 8-18 9-18

Major Lithium Producers (ALB, FMC, SQM) Chinese Lithium Integrated (Ganfeng, Tianqi) Battery Value Chain Coverage Universe






Figure 3: 1-Week Performance


WM

L-1

1.8

%

CR

E-7

.0%

AA

L-2

.9%

AJ

M-2

.3%

M

L-1

.2%

AL

B-0

.5%

S

GM

A0

.0%

DL

I0

.0%

SQ

M0

.1%

NM

T4

.0%

FM

C4

.1%

GX

Y7

.1%

L

SC

8.1

%

Tia

nq

i9

.3%

PL

S1

0.8

%

KD

R1

1.0

%

N

LC

15

.5%

OR

L1

8.5

%

L

AC

19

.8%

N

MX

20

.6%

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

1 W

ee

k %

Ch

ange

Lithium Peers

LE

M-1

9% MN

S-7

%

NO

U-5

%

L

LG

-4%

NG

C-4

%

EG

Z,

0.0

%

FM

S,

0.0

%

SY

R,

5.9

%

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

1 W

ee

k %

Ch

ange

Graphite Peers

FC

C-1

3.9

%

KB

G-1

2.5

%

CO

B-1

1.1

%

FT

-8.7

%

K

BL

T-1

.8%

SS

S0

.0%

CU

Z0

.0%

LIC

2.5

%

EC

S1

0.6

%

CL

Q1

2.9

%

BA

T2

0.8

%

-80.00%

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

1 W

ee

k %

Ch

ange

Cobalt Peers

Co

-0.1

%

Cg

-4%

Co

ve

rag

e,

7.4

%

Li, 5

.7%

-25.00%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

1 W

ee

k %

Ch

ange

Group Averages






Figure 4: 3-Month Performance


DL

I-9

0%

L

SC

-46

%

WM

L-4

4%

KD

R-3

9%

AJ

M-3

1%

Tia

nq

i-2

2%

AA

L-2

0%

AA

L-2

0%

OR

L-2

0%

NM

T-1

7%

GX

Y-1

7%

M

L-1

6%

L

AC

-14

%

N

LC

-11

%

N

MX

-5%

SQ

M-3

%

PL

S-2

%

FM

C,

1.4

%

AL

B,

11

.5%

S

GM

A,

23

.8%

-150.00%

-125.00%

-100.00%

-75.00%

-50.00%

-25.00%

0.00%

25.00%

50.00%

75.00%

100.00%

125.00%

150.00%

3 M

on

th %

Ch

ange

Lithium Peers

LE

M-4

6%

FM

S-3

7%

NG

C-3

5%

EG

Z-2

1%

L

LG

-19

%

MN

S-1

4%

SY

R-1

4%

NO

U-5

%

-80.00%

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

3 M

on

th %

Ch

ange

Graphite Peers

CO

B-6

8%

LIC

-59

%

CL

Q-4

9%

SS

S-3

7%

FC

C-3

7%

KB

G-3

6%

CU

Z-3

3%

K

BL

T-3

2%

FT

-19

%

EC

S-1

3%

BA

T,

3.5

7%

-100.00%

-80.00%

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

3 M

on

th %

Ch

ange

Cobalt Peers

Co

ve

rag

e-2

1%

Li

-17

%

Co

-35

%

Cg

-24

%

-100.00%

-75.00%

-50.00%

-25.00%

0.00%

25.00%

50.00%

75.00%

100.00%

3 M

on

th %

Ch

ange

Group Averages






Figure 5: 1-Year Performance


DL

I-9

3%

WM

L-6

7%

L

SC

-65

%

CR

E-5

0%

N

MX

-40

%

Tia

nq

i-3

7%

AL

B-2

0%

L

AC

-14

%

NM

T-1

2%

SQ

M-1

1%

N

LC

-10

%

OR

L0

.5%

AJ

M2

%

FM

C4

%

GX

Y7

%

M

L1

5%

AA

L2

8%

KD

R3

1%

PL

S6

1%

-200.00%

-150.00%

-100.00%

-50.00%

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

1 Y

ear

% C

han

ge

Lithium Peers

FM

S-6

2%

LE

M-4

9%

L

LG

-47

%

SY

R-3

2%

MN

S-2

4%

NO

U-2

1%

EG

Z-6

%

NG

C-4

%

-100.00%

-75.00%

-50.00%

-25.00%

0.00%

25.00%

50.00%

75.00%

100.00%

1 Y

ear

% C

han

ge

Graphite Peers

LIC

-81

%

KB

G-6

3%

BA

T-5

7%

CU

Z-5

7%

SS

S-5

2%

FT

-51

%

CL

Q-4

9%

FC

C-4

5%

K

BL

T-3

3%

EC

S-3

0%

CO

B7

3%

-200.00%

-150.00%

-100.00%

-50.00%

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

350.00%

400.00%

1 Y

ear

% C

han

ge

Cobalt Peers

Co

ve

rag

e-2

6%

Li

-10

%

Co

-41

%

Cg

-30

%

-100.00%

-75.00%

-50.00%

-25.00%

0.00%

25.00%

50.00%

1 Y

ear

% C

han

ge

Group Averages






Figure 6: Lithium Comparables


Share

Price

Market

Cap EV

Company Ticker ($) (US$MM) (US$MM) Stage Lithium Project(s) Location

Producers 2018 2019

Tianqi Lithium Corp SZ:002466 ¥38.74 ¥44,243 ¥44,183 Producer Talison (51%) Australia 9.7x 7.5x

Soc. Qui. y Min. de Chile NYSE:SQM $46.76 $12,307 $12,997 Producer Atacama / Cauchari (50%) Chile / Argentina 13.4x 11.1x

Albemarle Corp NYSE:ALB $102.52 $11,118 $11,968 Producer Atacama / Talison (49%) Chile / Australia / US 12.0x 10.9x

FMC Corp NYSE:FMC $89.62 $12,066 $15,013 Producer Hombre Muerto Argentina 11.3x 10.5x

Galaxy Resources Ltd ASX:GXY A$2.58 A$1,051 A$1,005 Producer Mt Cattlin / Sal de Vida Australia / Argentina 8.5x 7.7x

Orocobre Ltd ASX:ORE A$4.24 A$1,105 A$1,098 Producer Olaroz (66.5%) Argentina 16.6x 13.8x

Average (Excluding Orocobre) excl. Orocobre 11.0x 9.6x

Attributable LCE EV

Hard Rock Developers / Explorers (000t) /t LCE

Pilbara Minerals Ltd ASX:PLS A$0.88 $1,107 $1,115 FS Pilgangoora Australia 3,887 $287

Galaxy Resources Ltd ASX:GXY A$2.58 $762 $715 Construction Mt Cattlin / Sal de Vida Australia / Argentina 9,669 $74

Altura Mining Ltd ASX:AJM A$0.21 $277 $364 FS Pilgangoora Australia 989 $368

Kidman Resources Ltd ASX:KDR A$1.17 $296 $300 Exploration Earl Grey Australia 7,009 $43

♦ Nemaska Lithium Inc TSX:NMX C$0.82 $535 $642 FS Whabouchi Canada 3,367 $191

Desert Lion Energy Inc TSXV:DLI C$0.09 $4 $4 Producer Namibia Africa 371 $11

♦ Sigma Lithium Resources Corp TSXV:SGMA C$2.29 $118 $153 FS Xuxa Brazil 521 $294

Neometals Ltd ASX:NMT A$0.26 $102 $70 Construction Mt Marion (13.8%) Australia 281 $250

Critical Elements Corp TSXV:CRE C$0.80 $98 $99 PEA Rose Canada 447 $222

Average $193

Attrib. LCE Res. EV

Brine Developers / Explorers (000t) /t LCE

Orocobre Ltd ASX:ORE A$4.24 $801 $794 Producer Olaroz (66.5%) Argentina 4,879 $163

♦ Lithium Americas Corp TSX:LAC C$6.16 $430 $376 FS Cauchari (50%) / LNC Argentina / US 5,876 $64 +

♦ Millennial Lithium Corp TSXV:ML C$1.71 $109 $80 Exploration Multiple Assets Argentina 3,009 $27

Wealth Minerals Ltd TSXV:WML C$0.60 $55 $54 Exploration Multiple Assets Chile - -

♦ LSC Lithium Corp TSXV:LSC C$0.40 $47 $38 FS/PFS Multiple Assets Argentina 1,609 $24

♦ Neo Lithium Corp TSXV:NLC C$1.12 $77 $76 Exploration Tres Quebradas Argentina 2,014 $38

Advantage Lithium Corp TSXV:AAL C$0.68 $83 $70 Exploration Cauchari Argentina 2,268 $31 *

Average $59 + Cauchari-Olaroz only; * only inferred resource

Trading Metrics

EV / EBITDA





Figure 7: Global Monthly Plug-In Electric Car Sales

Source: GreenCarReports.com

Figure 8: YoY Global Electric Car Sales Growth

Source: Cormark Securities Inc.

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec

# of

Ele

ctri

c Ca

r Sa

les

2013 2014 2015 2016 2017 2018

0%

20%

40%

60%

80%

100%

120%

140%

160%

Nov-13 Jun-14 Dec-14 Jul-15 Jan-16 Aug-16 Mar-17 Sep-17 Apr-18 Oct-18





Figure 9: Lithium Prices

Source: Asian Metals

Source: Administration Federal de Ingresos Publicos, Argentina (Reporting Stopped Feb. 23, 2018), Orocobre, Cormark Securities Inc.

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

Pri

ce

, $

/t

Cormark Lithium Price Forecast

Source: Asian Metals Source: Cormark Securities Inc.

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

2015-09-24 2016-04-30 2016-12-05 2017-07-12 2018-02-16 2018-09-23

Pri

ce

, U

S$

/t

Lithium Spot Prices In China (Lows & Highs): Last 3 Years

Lithium Carbonate (US$/t, 99.5%) Lithium Hydroxide (US$/t, 96%)

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

2016-05-05 2016-09-06 2017-01-08 2017-05-12 2017-09-13 2018-01-15 2018-05-19 2018-09-20

Pri

ce (U

S$/t

)

Lithium Carbonate Contract Prices (Salar de Jujuy & Orocobre Reported Prices)

Orocobre Avg. Quarterly Sale Price Cormark Forecast Salar de Jujuy 10-Day Rolling Contract Prices

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

2018-06-28 2018-07-27 2018-08-25 2018-09-23

Pri

ce

, U

S$

/t

Lithium Spot Prices in China (Lows & Highs): Last 3 Months


Mark Chiang, Associate, (416) 943-6397, [email protected]


During the past twenty-four months, Cormark Securities Inc., either on its own or as a syndicate member, participated in the underwriting of securities for these companies


Figure 10: Cobalt Comparables


Figure 11: Cobalt Prices

Source: London Metals Exchange Source: London Metals Exchange

Company Ticker

Share

Price

($)

Mkt Cap

($MM)

EV

($ MM) Project(s) Location Minerals Grade, % Stage

Attr. Co

MM lb

EV / lb

Co

C$/lb

Clean TeQ CLQ.AX A$0.48 A$277 C$172.7 Syerston Australia Ni, Co, Sc 0.10% Pre-feas 286.0 0.6

♦ Cobalt 27 KBLT.V C$6.39 C$542 C$288.5

First Cobalt FCC.V C$0.31 C$105 C$77.9 Keeley-Frontier Ontario Co, Ag Explor.

Ecobalt ECS.TO C$0.94 C$150 C$113.8 Idaho Cobalt Idaho Cu, Co, Au 0.59% FS 62.4 1.8

♦ Fortune Mnrl. FT.TO C$0.11 C$39 C$37.8 NICO NWT, SK C$0.0 .09-0.27% DFS 82.3 0.5

Cobalt Blue COB.AX A$0.32 A$28 C$17.2 Thackaringa Australia Cobalt-pyrite 0.08% Drilling 135.3 0.1

Cruz Cobalt CUZ.V C$0.10 C$7 C$3.7

Bucke, Coleman,

Johnson, War Eagle,

Idaho Star

Ontario,

IdahoC$0.0 Explor.

LiCo Energy LIC.V C$0.21 C$4 C$2.2 Teledyne Cobalt Ontario Co, Ni, Ag 0.45% Drilling

King's Bay KBG.V C$0.04 C$2 C$1.6Lynx Lake, Quebec

Cobalt

NFLD &

Que.Co, Cu, Ni, Ag Explor.

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

Fe

b-1

2

Nov-1

2

Au

g-1

3

Ma

y-1

4

Fe

b-1

5

Nov-1

5

Au

g-1

6

Ma

y-1

7

Fe

b-1

8

Pri

ce

, U

S$

/ lb

$20

$22

$24

$26

$28

$30

$32

$34

Ju

l-1

8

Au

g-1

8

Se

p-1

8

Pri

ce

, U

S$

/ lb


Mark Chiang, Associate, (416) 943-6397, [email protected]


During the past twenty-four months, Cormark Securities Inc., either on its own or as a syndicate member, participated in the underwriting of securities for these companies


Graphite Comparables Figure 12: Resource Metrics


Figure 13: Feasibility Study Metrics


We, MacMurray D. Whale and Mark Chiang, hereby certify that the views expressed in this research report accurately reflect our personal views about the subject company(ies) and its (their) securities. We also certify that we have not been, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report.

Company Project(s) Location Meas. Ind. Inf. Notes

Syrah Resources Ltd A$2.35 A$641 A$431 Balama Mozambique 11.0% 11.0% 11.0% 128,500 15.11 3% Cg cutoff

Magnis Resources Ltd A$0.33 A$196 A$191 Nachu Tanzania 4.7% 5.7% 5.8% 9,344 20.41 3% Cg cutoff

♦ Mason Graphite Inc C$1.10 C$136 C$97 Lac Gueret Quebec 17.0% 16.0% 0.0% 9,477 10.24 27.8%, 6% cutoff

Leading Edge Materials Corp C$0.31 C$27.9 C$24.8 Woxna Sweden 10.7% 9.3% 8.5% 9,600 3.23

NextSource Materials Inc C$0.08 C$42.2 C$41.3 Molo Madagascar 6.3% 6.3% 5.8% 8,654 6.56 2% Cg cutoff

Nouveau Monde Graphite Inc C$0.29 C$33.6 C$27.7 Matawinie Quebec 4.0% 4.1% 3,345 14.37 2.5% Cg cutoff

Northern Graphite Corp C$0.27 C$18.6 C$14.8 Bissett Creek Ontario 1.8% 1.6% 1,334 31.36 1% Cg cutoff

Focus Graphite Inc C$0.03 C$5.4 C$4.5 Lac Knife Quebec 21.5% 14.4% 16.2% 2,143 2.52 3% Cg cutoff

* Excludes Inferred Resources

*EV / t

Cg

C$/t

Attr. Cg

'000 t

Share

Price

($)

Mkt Cap

($ MM)

EV

($ MM)

Grade

Company Project(s) Large Med. Small IRR Stage

Syrah Resources Ltd A$2.35 A$641 A$431 Balama 32.0% 22.5% 45.5% 313,000 193 1,000 286 71% DFS

Magnis Resources Ltd A$0.33 A$196 A$191 Nachu 41.0% 240,000 269 2,350 559 98% DFS

♦ Mason Graphite Inc C$1.10 A$136 A$97 Lac Gueret 27.0% 15.0% 58.0% 51,900 200 1,465 282 34% DFS

Leading Edge Materials Corp C$0.31 C$27.9 C$24.8 Woxna 10,000 - Care/Maint

NextSource Materials Inc C$0.08 C$42.2 C$41.3 Molo 46.0% 32.5% 21.0% 17,000 15 1,014 433 25% DFS

Nouveau Monde Graphite Inc C$0.29 C$33.6 C$27.7 Matawinie 46.0% 11.0% 43.0% 50,000 109 1,492 495 25% PEA

Northern Graphite Corp C$0.27 C$18.6 C$14.8 Bissett Creek 76.5% 4.8% 18.6% 20,800 83 1,500 600 20% DFS

Focus Graphite Inc C$0.03 C$5.4 C$4.5 Lac Knife 33.5% 29.8% 16.6% 44,300 125 1,713 331 24% DFS

* Excludes Inferred Resources

Capex

(US$

MM)

Price/t

(US$)

Opex / t

(US$)

Capacity

(tpa)

59.0%

Product DistributionShare

Price

($)

Mkt Cap

($ MM)

EV

($ MM)


RECOMMENDATION TERMINOLOGY

Cormark’s recommendation terminology is as follows: Top Pick our best investment ideas, the greatest potential value appreciation Buy expected to outperform its peer group Market Perform expected to perform with its peer group Reduce expected to underperform its peer group Our ratings may be followed by "(S)" which denotes that the investment is speculative and has a higher degree of risk associated with it.

Additionally, our target prices are set based on a 12-month investment horizon.

For Canadian Residents: This report has been approved by Cormark Securities Inc. (“CSI”), member IIROC and CIPF, which takes responsibility for this report and its dissemination in Canada. Canadian clients wishing to effect transactions in any security discussed should do so through a qualified salesperson of CSI. For US Residents: Cormark Securities (USA) Limited (“CUSA”), member FINRA and SIPC, accepts responsibility for this report and its dissemination in the United States. This report is intended for distribution in the United States only to certain institutional investors. US clients wishing to effect transactions in any security discussed should do so through a qualified salesperson of CUSA.

Every province in Canada, state in the US, and most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as the process for doing so. As a result, some of the securities discussed in this report may not be available to every interested investor. This report is not, and under no circumstances, should be construed as, a solicitation to act as securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. This material is prepared for general circulation to all clients and does not have regard to the particular circumstances or needs of any specific person who may read it. This report is provided for information purposes only and does not constitute an offer or solicitation to buy or sell any securities discussed herein.

The information and any statistical data contained herein have been obtained from sources believed to be reliable as of the date of publication, but the accuracy or completeness of the information is not guaranteed, nor in providing it does CSI or CUSA assume any responsibility or liability. All opinions expressed and data provided herein are subject to change without notice. The inventories of CSI or CUSA, its affiliated companies and the holdings of their respective directors, officers and companies with which they are associated may have a long or short position or deal as principal in the securities discussed herein. A CSI or CUSA company may have acted as underwriter or initial purchaser or placement agent for a private placement of any of the securities of any company mentioned in this report, may from time to time solicit from or perform financial advisory, or other services for such company. The securities mentioned in this report may not be suitable for all types of investors; their prices, value and/or the income they produce may fluctuate and/or be adversely affected by exchange rates.

No part of any report may be reproduced in any manner without prior written permission of CSI or CUSA.

A full list of our disclosure statements as well as our research dissemination policies and procedures can be found on our web-site at: www.cormark.com

http://www.cormark.com/

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