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On Wednesday, Scotiabank (TSX:BNS) analyst Ben Isaacson revised the price target for Lithium Argentina (NYSE:LAR) to $3.50 from the previous target of $4.00, while maintaining a Sector Outperform rating on the company’s shares. Isaacson’s decision reflects a cautious yet optimistic view of the small-cap lithium producer’s future despite a challenging market. According to InvestingPro data, the stock has shown resilience with a 14.61% return over the past week, though analyst targets range widely from $2.80 to $10.00 per share.
Isaacson highlighted that Lithium Argentina is progressing towards its production guidance of 30,000 to 35,000 metric tons for the year 2025. The Cauchari project, which produced approximately 25,000 metric tons in the year 2024, is focusing on enhancing operational stability and consistency while optimizing costs. The analyst remains confident in the company’s ability to deliver on its ramp-up to production.
Despite Lithium Argentina’s current production of sub-battery grade lithium, the analyst noted an improvement in year-over-year pricing adjustments. In the fourth quarter, the company achieved an average selling price of approximately $8,000 per metric ton, which includes a pricing adjustment with both fixed and variable components, amounting to $2,100 per metric ton. Isaacson pointed out that even at these prices, the Cauchari project is generating positive operating cash flow. However, InvestingPro data reveals the company faces financial challenges with negative EBITDA of $31.2 million and a current ratio of 0.49, indicating potential liquidity concerns.
Additionally, the analyst mentioned that Exar, a part of Lithium Argentina’s operations, has significantly improved its financial position by reducing debt and securing refinancing with extended maturities under more favorable terms. This move has meaningfully de-risked the company’s balance sheet.
Lithium Argentina is also advancing its technological capabilities by integrating a 5,000 metric ton Direct Lithium Extraction (DLE) demonstration plant with Stage 1 of its operations, which can be utilized for the forthcoming Stage 2. Isaacson noted that the company plans to submit a Resource Growth Incentive (RIGI) application soon.
The adjustment in the price target to $3.50 is attributed to a lower lithium carbonate equivalent (LCE) price assumption of $15,000 per metric ton and some refinements in the Net Asset Value (NAV) calculations. The company is now being valued using a trough-cycle multiple of 15.5 times its projected 2026 EBITDA and 0.5 times its estimated 2026 NAV with a 10% discount. Trading at a price-to-book ratio of 0.49, InvestingPro analysis suggests the stock is currently fairly valued. For deeper insights into LAR’s valuation and 7 additional key ProTips, including detailed financial health metrics, explore the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Lithium Argentina AG announced the completion of its corporate migration from Canada to Switzerland. This transition will see the company maintain its listings on the Toronto Stock Exchange and the New York Stock Exchange under a new ticker symbol, expected to take effect in January 2025. The move aligns with the company’s operational focus, with its lithium brine operations in Argentina and new headquarters in Zug, Switzerland. Meanwhile, Stifel analysts have reiterated their Buy rating and a $10 price target for Lithium Argentina, citing the company’s recent performance and future projections. The company achieved 85% of its design capacity in the fourth quarter of 2024 and expects to produce between 30 to 35 kilotonnes of Lithium Carbonate Equivalent in 2025. Stifel’s analysis highlights Cauchari’s potential as a cost-effective lithium brine asset, supporting a positive long-term view. Despite these operational successes, the stock is trading below the average valuation for comparable companies. The firm notes that future stock price movements may be influenced by broader trends in the commodity market.
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