Q2 Metals (TSXV: QTWO; US-OTC: QUEXF) said it has drilled its best hole yet at the Cisco lithium project, which it estimates as the fourth-largest globally, as the company advances work toward a preliminary economic assessment (PEA) this year in Quebec’s James Bay region.

Hole CS26-093 intersected three separate mineralized intervals, led by 403.7 metres grading 1.57% lithium oxide (Li 2 O) from 383.6 metres depth, the company reported Tuesday. The hole also returned 213.8 metres at 1.93% Li 2 O from 154.2 metres and a near-surface interval of 60.8 metres at 1.24% Li 2 O from 17.7 metres. See a 3-D image of the drilling with analysis:

“Drill hole-93 exceeded our expectations, intersecting three wide mineralized zones that collectively span approximately 678 metres of the 803-metre hole,” Vice-President of Exploration Sage McCallum said in a release. It is “the best hole ever drilled on the Cisco project in terms of total mineralized pegmatite in one hole.”

Cisco’s April resource contains 295 million inferred tonnes grading 1.36% Li 2 O, which Canaccord Genuity says makes it the Western Hemisphere’s largest hard-rock lithium deposit. The brokerage says the project could support one of the world’s largest spodumene mines and views it as a compelling takeover target ahead of the PEA, as investors await more detail on mine design, costs and processing assumptions.

Shares of Q2 Metals rose 1.5% to $2.79 in Toronto on Tuesday morning, giving the company a market value of $594 million. The stock has gained more than 240% over the past year.

About 170 metres of the widest intercept reported Tuesday lies outside the conceptual pit shell used for Cisco’s April resource. The shallowest interval begins at a vertical depth of about 14 metres near the CO20 outcrop zone, Q2 said.

“The area surrounding the CO20 zone is largely obscured by vegetation and till cover making these results particularly encouraging,” McCallum said. “Intersecting such broad and robust mineralization in an area that is not well exposed highlights the potential for additional mineralization beyond what is currently defined.”

The new results come as Q2 continues infill drilling intended to upgrade Cisco’s inferred resource to the indicated category and support its first PEA. That work matters because a higher-confidence resource is typically a key input for project studies and for narrowing the range of engineering assumptions ahead of development decisions. The company has completed 9,552 metres in 22 holes during its summer program, with four rigs working in the main deposit area.

The April resource ranks Cisco as the fourth-largest hard-rock lithium deposit globally, according to Q2. It includes 270 million pit-constrained tonnes at 1.36% Li 2 O and 24 million underground-constrained tonnes at 1.34% Li 2 O. The deposit is about 6.5 km from the Billy Diamond Highway and about 150 km north of rail infrastructure at Matagami.

Canaccord Genuity mining analyst Katie Lachapelle on Aug. 17 raised the brokerage’s target for Q2 to C$9.50 per share from C$5.80 after shifting its valuation from an in-situ approach to a full mine model ahead of the PEA.

Canaccord’s base case assumes a 6-million-tonne-per-year operation producing about 1 million tonnes annually of spodumene concentrate grading 5.5% Li 2 O. The brokerage said such an operation would rank among the world’s largest hard-rock spodumene mines while using only about half of Cisco’s existing resource over the modelled mine life.

The analyst applied a 50% risk adjustment to Canaccord’s net asset value estimate and benchmarked capital and operating costs against other Quebec lithium projects, with adjustments for Cisco’s infrastructure and location advantages. The brokerage said further project development and de-risking could narrow the gap between Q2’s market value and its estimated net asset value.

“In our view Cisco continues to be a compelling M\u0026A candidate for this reason,” Canaccord said.

Q2 began its summer drilling in June with about 20,000 metres planned, primarily to convert inferred resources to indicated while also testing extensions and regional targets. The company says the deposit remains open along strike and has identified additional targets across its 412.5-sq.-km property.

Q2 Metals President and CEO Alicia Milne said the company expects to deliver a steady flow of news and results this year.

“These results continue to further demonstrate the exceptional scale and continuity of mineralization at Cisco and reinforces our confidence in the project’s significant growth potential,” Milne said.

“We are advancing multiple workstreams in parallel, including our PEA which will provide the first comprehensive assessment of Cisco’s development potential and economics.”