Compass Minerals: Lithium Project Suspension Sinks Shares

Compass Minerals announced it has suspended the development of its lithium project indefinitely because of regulatory uncertainty in the state of Utah. We have updated our model to assume just a 25% chance the project enters production, versus our prior base-case assumption of a 100% chance the project moves forward. We have also revisited our forecasts for the salt and plant nutrition businesses. Having updated our model, our fair value estimate is now $45 per share, down from $65. Excluding lithium, we value Compass Minerals at $35 per share in our base case, with the remaining $10 per share reflecting our 25% probability-weighted valuation of the lithium project.