Savannah Resources Plc (LSE:SAV) is the sole owner of the Barroso Lithium Project in northern Portugal. The mining company recently announced results from a new scoping study on its Barroso lithium project in northern Portugal. The project is expected to generate significant cash generation and has an exceptional IRR of 77%. Investors are understandably over the moon with this news. As a result, the Savannah Resources share price jumped by 8.3% in the week following the news.
This appreciation is accredited to the encouraging news from the project study report. But in the near future, will the Savannah Resources share price continue to surge? Let’s explore.
Key Points
- Savannah Resources Plc is the sole owner of the Barroso Lithium Project in northern Portugal.
- The scoping study on its Barroso lithium project reported an exceptional IRR of 77%.
- Lithium projects, like the Barroso Lithium Project, face strong opposition from environmentalists and local communities.
What does Savannah Resources do?
Savannah Resources Plc engages in the exploration and development of lithium properties in Portugal. The company is focused on providing a long-term, local source of lithium raw material for Europe’s developing lithium battery value chain.
The lithium mining company has all the key ingredients for success. Not only the company owns Europe’s largest spodumene lithium project, but it also has significant exploration potential. Also, with the global demand for lithium expected to increase 4-fold by 20301, Savannah Resources seems perfectly positioned for explosive growth in the long run. At least, that’s what I think.
The bull case for the Savannah Resources share price
Savannah Resources shares have been on a bullish trend since the first quarter of 2021. To date, the stock has seen multiple dips and peaks and has managed to hit the peak price of 4.66p. During his two-year period, Savannah Resources share price declined by 40% from April 2022 to July 2022. Yet, it’s since started to bounce back.
One of the biggest strengths and a growing opportunity for Savannah Resources is the continuous increase in lithium demand. The world needs more lithium supply, and Savannah can provide responsibly sourced lithium for Europe.
The bear case for the Savannah Resources share price
Savannah Resources’ share underwent a prolonged bearish trend from mid-2019 till the first quarter of 2021. From the peak of 13p, the stock dropped as low as 1.1p. During these 18 months of continuous decline, Savannah Resources’ share lost 92% of its share value.
Lithium projects, like the Barroso Lithium Project, in Portugal face strong opposition from environmentalists and local communities, who are demanding stronger regulation and more transparency. But thankfully, Portuguese authorities approved its environmental impact assessment (EIA) quite recently.
Nevertheless, with increasing pressure to fight against climate change, future projects, expansions, and developments may run into more opposition, creating headwinds for the firm’s future growth.
Savannah Resources Share price prediction
The year 2023 has been a progressive year for the Savannah Resources Share price. The stock has appreciated by 102% to date.
In line with this trend, analysts also have a progressive view about the future of the Savannah Resources share price. The 12-month forecast shows a price target of 14p. And if this proves to be accurate, then investors could be able to tap into a significant growth opportunity.
However, forecasts are built on assumptions that may not come to pass. The Savannah Resource share price prediction appears to be based on the best-case scenario. But should developments not keep up with expectations, investors could be severely disappointed, and the stock may never reach this price target.
Should I buy Savannah Resources shares today?
Savannah Resources is excited about the potential to establish Portugal as a key player in Europe’s lithium-ion battery value chain. Portugal is Europe’s biggest lithium producer, but its miners sell almost exclusively to the ceramics industry and are only now preparing to produce the higher-grade lithium that is used in electric cars and to power electronic appliances.
While this speaks volumes about the future of the lithium company, I believe these shares will take its time to match the expected growth. There is no denying the fact that the stock could end up rising high in the long run, but there are still a lot of hurdles to overcome. I’m tempted to add these shares to my portfolio today, but only as a speculative investment. The risks are high, and it’s possible that the mining enterprise may fail in its mission.
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Article sources
- Savannah Resources, “Company Presentation“
Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.
