Despite lithium commodity prices plummetting over the past 18 months, one broker is backing a small-cap ASX lithium share to rise by as much as 275% over the next 12 months.
That ASX lithium share is Patriot Battery Metals Inc. CDI (ASX: PMT), which is at 48 cents today, up 3.23%.
Patriot Battery Metals owns the Corvette lithium spodumene project in the James Bay Region of Northern Quebec. Patriot describes James Bay as a top-tier mining jurisdiction.
Its 100% owned Corvette project incorporates 214 claims spanning a 21,715-hectare parcel of land with approximately 50 km of prospective lithium pegmatite trend along the La Grande Greenstone Belt.
Broker Shaw and Partners recently initiated coverage of this ASX lithium share with a buy recommendation. But what's really interesting is the broker's 12-month share price target.
Shaw and Partners reckons Patriot Metals shares will be worth about $1.80 apiece by this time next year.
Let's find out why.
Image source: Getty Images
Broker says ASX lithium share about to go gangbusters
In an article published on Listcorp, Shaw and Partners says the Corvette Project is "ideally positioned and timed to feed the burgeoning North American battery supply chain by the end of the decade".
The broker said that based on its modelling, Patriot Metals was pricing in a 6% spodumene price of US$1,050 per tonne into perpetuity.
This is below the broker's own long-term price forecast of US$1,487 per tonne.
Shaw and Partners said:
On our forecasts and lithium price deck every US$100/t increase in 6% Spodumene lifts our valuation by 30%. The valuation sensitivity demonstrates the extreme leverage currently on offer in PMT to higher lithium prices over the medium and long-term.
The broker acknowledges the challenge of significantly lower lithium prices today.
However, Shaw and Partners sees tailwinds for this ASX lithium share in the long term.
The broker added:
… we continue to forecast robust demand driven by the energy transition and increasingly, resource nationalism as pressure builds on western EV and battery makers to diversify supply chains for all battery metals, including lithium, away from China.
The broker said the United States will increase tariffs on lithium-ion batteries and battery parts from 7.5% to 25%, which will make the cost of imported Chinese cells higher than locally-produced cells.
The US imports a lot of Chinese batteries, but hardly any EVs, so the tariffs are largely pre-emptive. But the signal itself is important.
The US is doubling down on building out its own clean energy industries and showing it is willing to tie hundreds of billions in domestic subsidies with overt protectionism to do it, even with the Democrats still in office.
Corvette has an inferred mineral resource estimate of 109.2 Mt at 1.42%.
This makes it the largest lithium pegmatite in the Americas and the eighth largest globally, with significant exploration potential remaining, the broker said.
What's happening with ASX lithium stocks today?
The S&P/ASX 200 Index (ASX: XJO) is in recovery mode today following yesterday's trouncing. The ASX 200 is currently 0.9% higher, with mining the leading market sector.
At the time of writing, the S&P/ASX 200 Materials Index (ASX: XMJ) is up 1.75%.
The larger and more well-known ASX lithium shares are all significantly stronger, too.
Here are some examples:
- Core Lithium Ltd (ASX: CXO) shares are up 5.49% to 9.6 cents apiece
- Pilbara Minerals Ltd (ASX: PLS) shares are up 5.32% to $3.02 apiece
- Liontown Resources Ltd (ASX: LTR) shares are up 4.04% to 95 cents apiece
- Arcadium Lithium CDI Def (ASX: LTM) shares are up 3.5% to $5.18 apiece
- IGO Ltd (ASX: IGO) shares are up 3.24% to $5.74 apiece
As we reported yesterday, Pilbara Minerals CEO Dale Henderson thinks lithium prices may have reached a floor, given signs of falling supply as higher-cost producers exit the market. With commodity prices this low, he expects funding for new lithium projects to dry up, thereby reducing competition in the medium term.
