Canaccord Genuity Buy recommendation on EMN

Canaccord stated: “Being located in the Czech Republic we believe it will gain favourable treatment by the EU battery supply chain and development cycle.

“We believe that the operation will be the first large scale, ex-China producer into production, and due to favourable chemistry, we expect it will be placed at the low end of the cost curve.

“The project has strong ESG credentials given it will reclaim and rehabilitate existing tailings during the processing, which is another feature of EU-based projects.”

Potential catalysts

In 2021, EMN will build a pilot plant to process ore and generate samples for offtake partners and expects the feasibility study for project to be completed by the end of the year.

Canaccord stated: “We anticipate any signing of offtake agreements to be a strong positive for the equity.

“The company continues to investigate options for partnerships, and if an experienced or large-scale partner is found we would expect a material rerating of the equity.

“Funding arrangements are also a key focus in 2021, with the EU indicating a desire to accelerate the project by providing funding.

“If a low-cost debt option is provided this would significantly de-risk our model, given we run a 12% WACC and 40% risk weighting in setting our price target.”

Canaccord recommended a speculative buy rating with the target price at A$0.55.

The project is favourably located in central Europe where a large battery supply chain is being established.