Standard Lithium Ltd.

Standard Lithium Ltd. (NYSE: SLI) is a lithium brine exploration and development company based in the United States. The Arkansas Lithium Project, located in south-central Arkansas, focuses on the company's exploration and development efforts. Lanxess Project, Tetra Project, and Bristol Dry Lake Project are among its other initiatives.

Latest News:

• Strategic Equity Investment: Standard Lithium Ltd. made a USD 2.5 million equity investment in Aqualung Carbon Capture AS, a pioneer in carbon capture technology, on May 12, 2022. The investment by Standard Lithium was part of Aqualung's USD 10 million strategic equity round.
• Partnered with Entergy: On May 3, 2022, SLI and South Arkansas Community College formally introduced six new electric vehicle charging stations. Standard Lithium partnered with Entergy (NYSE listed Energy Company), Adopt a Charger, and South Arkansas Community College to establish six Level 2 – 240-volt EVCS charging stations in the Murphy Arts District in downtown El Dorado, AR, which is accessible to the public.

Q3 FY22 Results:

• Robust Cash Position for Future Business Growth: The total cash and cash equivalents as of March 31, 2022, were USD 136.9 million, up from USD 30.3 million on December 31, 2021, with the increased cash coming from stock issues.
• Current Assets and Debt Position: With existing assets of USD 139.1 million, SLI has a current ratio of 30.80x, greater than the industry median of 2.61x. Moreover, the company is debt-free and has capital lease commitments of USD 0.3 million as of March 31, 2022
• Bottom Line Losses: The total net income decreased from negative USD 9.8 million to negative USD 13.74 million on March 31, 2022. Moreover, diluted EPS dropped from a negative USD 0.07 to a negative USD 0.08 in Q3 FY22.
• Huge Lithium Resource: The LANXESS Project contains 3.14 Mt of LCE, and a lithium carbonate indicated resource of 20900 TPA (used in the glass and ceramic industries and medicine). In addition, the SWA Project has inferred 1.195 Mt of LCE with a Lithium Hydroxide resource of 30000 TPA. The future of Lithium is depicted in the graph below.

(Source: Company Filings)

Key Risks:

• Product Risk: The company's choice to certify its hydroxide output exemplifies this. Another factor to consider is the possibility of declining lithium prices. Prices for hydroxide, to be more exact. This risk stems from the potential that supply would outstrip demand, resulting in a price decline for the items they provide.
• Underlying Commodity Price risk: The company is exposed to a sharp plunge in the underlying metal prices (Lithium), a sharp plunge in the underlying commodity prices could have a weigh on the company’s overall performance in the market.

Stock Recommendation:

SLI is assessing the economics of lithium extractions and is, therefore, a pre-revenue business investing in lithium mining, which will be widely utilized in electric vehicles. In addition, the company boasted a post-tax IRR of 36.0% for the lithium business, which is highly favourable for the sector.

Further, lithium prices are quite firm and expected to remain elevated given robust demand for it.

Considering the growth of the lithium business, it currently has one of the largest Lithium projects and strong underlying commodity prices. We recommend a “Speculative Buy" rating on the stock at the current market price of USD 4.36 as of June 15, 2022, at 07:35 AM PDT.

1-year technical chart as of June 15, 2022, at 07:35 AM PDT, Source: REFINITIV. Analysis by Kalkine group

Technical Summary Analysis

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.