New Lithium Kids in Town

Source: Howard Klein for Streetwise Reports 06/11/2018

Howard Klein of RK Equities and the “Lithium-ion Bull” newsletter expresses his thoughts on several different segments of the lithium market.

Lithium equities these past two or three years have often been the land of the Deaf, Dumb and Blind: Most Institutional Investors, Certain Sell-side Analysts, and Mass Affluent Retail are playing bitcoin, cannabis and Tesla, but not yet playing battery materials.

Despite bouts of over-exuberance in selected issuers, the “Lucky Country,” Australia, has been a welcoming home to more than a handful of #Lithium Pinball Wizards of and in Oz. Hard rock names in Western Australia in particular, but more broadly, an ASX listing has generally resulted in a lower cost of equity capital than a TSX or AIM listing for lithium developers. Orocobre, Pilbara, Galaxy—to name three—have all managed to raise equity capital when they needed it at relatively high valuations. The KiDs R Alright is one of many The Who metaphors I have used to describe Kidman Resources Ltd. (KDR:ASX) over the past year. Lithium Mr. Market is ripe for some Kidman history rhymes. To enable more Mass Affluent Retail to experience “Life in the Fast Lane.”

Eight months after I penned a Seeking Alpha Blog as an open letter to Global X Management with a roadmap to improve its lithium index, Amplify Advanced Battery Metals and Materials ETF (BATT) has emerged as a competitor to that which I called DIM LIT, but have had a bit of change of heart in H1 lithium volatility. Global X Lithium and Battery Tech ETF (LIT) grew assets under management (AUM) from $150 million to $1 billion from September to January. BATT currently has $2 million AUM. I will be keeping close watch to the absolute and relative AUMs of these two each quarter.

I don’t believe Mr. Market thinks of Neometals Ltd. (NMT:ASX) as a 10K hydroxide producer by 2021, but that seems the plan for ~$200 million capex, a quite manageable number for a lithium producer, which should be accretive to that which I called Cash Machine NMT last September.

Silver Coast Research does a good job for Neometals referencing Matt Bohlsen’s Seeking Alpha article.

I consider much about Silver Coast’s commentary on Piedmont Lithium Ltd. (PLL:ASX) (and AVZ) to be on point and would encourage you to read my extensive comments within this Seeking Alpha post. My main quibble is that he seems to present the false choice of picking only one lithium stock and seems to have a short-term trader mentality (buying Piedmont Lithium last fall near a top only to sell at a loss while a recovery seems to be in its early stages). Neometals and Piedmont Lithium are largely different kettles of fish. I believe it prudent to have more than two lithium stocks and Piedmont’s uniqueness qualified it for my Screaming Buy album in April. Neometals was among the runners up. Peter Epstein did some constructive Q&A with Piedmont CEO Keith Phillips, published on May 28.

Australian Super—the largest institutional investor in Australia—did some talking with further on-market buying in May. “AustralianSuper Pty. Ltd. is a superannuation manager with more than 2.2 million members and more than $120 billion in assets under management.” AustralianSuper increased its stake in Piedmont Lithium from 6.66% to 7.77%.

I expect the ChinAustraliaAsia supply chain from Lithium Rock-to-Chemicals-to-Cathodes-to-Batteries to be mirrored within a few years in this 15-20-year Lithium Supercycle by Hard Rock mines close to traditional auto manufacturing hubs in North America, Europe and Brazil.

Savannah Resources Plc (SAV:LON), a Piedmont lookalike in Portugal could be well placed to feed German, French and British EV makers one day. I expand a bit on this one below.

Sigma Lithium Resources Inc. The good Life Australia exists too in iron ore and lithium-rich Minas Gerais, Brazil. Brazil has a big auto manufacturing industry and BYD is present there. I’ll comment on this one in the future.

Savannah controls the largest spodumene deposit in Western Europe. A Scoping Study is to be published in next few weeks.

Market Cap = GBP56M = USD 75M for 75% of project = USD 100M implied market cap for the project

I had the opportunity to meet Savannah CEO David Archer at the Benchmark Minerals New York World Tour and took some notes in a follow up 60-minute call.

Company presentation.

Background: Portugal already produces lithium. Along with the U.S., Zimbabwe and Brazil, Portugal makes up that 5–10% afterthought of lithium supply after we rattle off Chile, Argentina and Australia/China as main countries producing this magical white powder.

Savannah is 29.9% controlled by the Sultan’s family in Oman. This family came into Savannah for its copper project in Oman (and mineral sands in Mozambique) but is very supportive and can/will follow their money. GBP 15 million has been invested in the company to date. GBP 6.6 million by founders/management including GBP 1 million from the CEO.

Lithium in Portugal is now Savannah’s main focus. It bought the property in May 2017—just one year ago—from an Austrian family who retains 25% free-carried project level interest.

In December, Savannah published a resource of 3 million tons. By February it was 9 million and in April it is at 14.1 million tons, with only 12.5K tons of drilling (150 very shallow holes, all the mineralization is shallow, near surface).

Savannah has an exploration target to grow this by another 8-12 millin tons in the near future, i.e., it hopes to be in the mid-20s this year and over 30 million tons next year.

Within the tenement boundaries are three main mineralized areas so far, but it is Grandeo area (9 million tons) that will be the main focus of scoping study and initial mine plan.

Intercepts/thicknesses have been attractive at 1–1.2%.

Savannah has Request for Proposal out for full feasibility study with …read more

From:: The Energy Report

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