Thanks for the article link Anon.
Appreciated (and love your avatar)
LPG

Otto Rock has outed a lot of crooked people in the time that I’ve read his blog and subscribed to his letter. Gwen Preston is on my list of people that lack credibility with my investment dollars. All, Corey, Doc, Rick, Gary et al…..these are people that I can listen to.

It is important to only invest in the quality companies, with real deposits, that are in production or getting permitted to go into production, that off-take agreements, and that are not the fluff marketing pieces. I’ve studied the sector far longer that the majority of those those throwing out baseless opinions, and while I like Rick Rule a great deal, his comments on where he assumes the demand is coming from and his understanding of the individual players and real companies in the space are lacking.

Speaking of having your eyes wide open, here is real research and not baseless opinion about the sector being a pump and dump. Time for some of the people on here to do a little homework…….

I’ll just re-post some thoughts from the weekend show:

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On April 17, 2016 at 10:30 am,
Excelsior says:

You have brought up a valid concern as everyone remembers the Lithium, Graphite, and Rare Earth bubbles popping from a few years ago. I was active in the Lithium and Rare Earth bubbles back in 2010-2012, and they were full of a lot of hot air. That doesn’t mean that there wasn’t money to be made, or legitimate deposits being discovered, but the price spikes and business plans based on those commodities prices were unrealistic and unsustainable. As a result they came crashing down hard.

With that perspective and experience in mind, there is no doubt that Lithium is getting frothy, and some of the hot air has returned. The Lithium price has shot up a bit too fast and too much. However, while I do expect the Lithium price to come back down some, there is real demand pressure and production shortfalls projected over the next few years that were not present in the last bubble (even if there was never another Electric Car made and Tesla closed tomorrow…… but that is very unlikely).

The problem, just like in Gold mining, is that there are many explorers jumping on the bandwagon (over 23 on my last count) that are likely NEVER going to make it into production, and they’ll probably get flushed or change business branding again in the next 1-2 years. It’s a shame investors are getting duped with their marketing stories.

Each week I dedicate time to a few key areas of focus, and I really never stopped following the Lithium sector, because batteries are in everything from my phone to computer to power tools to Airlines and forklifts. The movement to electric vehicles is also happening and will happen one way or the other. The big risk to the Lithium sector isn’t Tesla failing or cheap oil prices, but rather some other superior technology coming along that would make Lithium batteries obsolete. That is my only going concern.

Personally, I am interested in the “Best in Class” in many of the smaller commodity and energy sectors like Uranium, Renewable Energy, Lithium, Graphite, Zinc, Copper, PGMs, Base Metals, and Specialty Metals. There have to be a few companies pulling this stuff out of the ground, and its a growing and changing world out there. In every sector, there are still a few good ideas, good management teams, and companies doing the right thing (bear market or bull market).

My goal has not been to hype the Lithium sector any more that it already has been, but to report back on the companies that may actually be winners, and that investors could get positioned in to make money (frothy or not). I’ve kept my eye on companies like Orocobre, Galaxy Resources and Lithium Americas Corp for about 4-5 years now and have posted on all of them for years here on KER. (nobody gave a rats behind about them a few years ago, but now there is much more feedback on the sector because the news-flow and pricing spikes justify the interest…….Lithium is seen as just a Flavor of the month….but it appears here to stay)

The reason I have consistently promoted those 3 companies for years, and ignored most of the over-hyped explorers or fluff marketing companies is that those 3 are real companies, moving their projects forward, and they are the best in class.

In the time I have posted about them and offered commentary, news releases, and reasons they had many advantages over their peers, 2 of them have gone into production for Lithium and one of them has gone into production for their organoclay additives, and is fast tracking into Lithium production. I’d say to nail the 3 companies that would go from explorers, to developers, to producers accurately in the mining business was a pretty good call. (most companies will never make it into production). The other goal was for investors to be aware of this changing sector, and if people would have listened they would have made between 150-900% on those 3 companies over the last year or two, and about 50-300% in the last 6 months.

I’ve also mentioned Neo-Metals (RDRUY) recently, because they are going into production later this year, have a 14% stake in the Galaxy Resources brand new production, and they seem to be a legitimate company with a bright future.

The other 2 companies (Pure Energy Minerals & Nemaska Lithium) I have only started discussing since 2015. They are not as solid as the other 3 mentioned, but compared to their peers, they are near existing mines, in stable jurisdictions, have defined resources, and are moving forward with permitting, Feasibility Studies, and have started attracting off-take agreements. I did mention the other 20+ companies and the battery companies on Doc’s blog to at least expose investors to their names in case any become takeout targets or push forward with any successes.

***As for Lithium Demand.

Yes about 25% of the demand for Lithium comes from ceramics and glass manufacturing, and that percentage has stayed fairly constant, but the demand still continues to grow due to the rising world population and development going on all over the planet in emerging economies.

My main gripe is that so many people just look at Tesla or Electric Vehicles and snub their nose at the whole Lithium space, without really understanding the Lithium Battery marketplace. These people, even veterans in the mining sector neglect to cover the huge impact that BACKUP BATTERIES will have for storing the energy created in Solar & Wind base load power. They also seem to have missed the fact that many corporations are starting to operate using back up power at remote sites, for disaster recovery, and to handle energy created by their private solar and wind farms. I can’t remember one “expert” discuss these demand fundamentals in the Lithium story when it gets trashed on many of these precious metals outlets or even in the main-stream media’s fascination with Tesla.

What this means is that there is a growing Lithium demand for batteries even if electric cars don’t take off. The Renewable Energy sector stores its energy during peak performance in Batteries, so that it can provide stable power in off-peak times. People scoff at that sector as well, and there are challenges in it like any sector, but it is happening with their knowledge and without their permission 🙂

Then there is the entire developing world that will want smartphones / laptops/ tablets/ remote control toys like RC cars, RC planes, RC helicopters, and RC drones.

Then there is the Lithium batteries being utilized in the Airline industries, or for powering tow-motors and forklifts in Warehousing, or Power Tools and on and on….

I got out an electric drill to fix something today and checked; yep, a Lithium battery.
When one digs a bit deeper, they will find out that there are multiple drivers for Lithium Demand. The Renewable Energy sector is actually growing very fast, and all our gadgets in the modern world, for now, run on Lithium power.

– So will the Lithium run correct? Very likely.

– Are most of the Lithium stocks garbage? Yes.

– Are investors misinformed? Yes, on both sides of the argument.

> Lithium bulls are doing what Gold bulls so often do and just shoveling money at any name or any project with the word Lithium in its name or that a newsletter tells them to.

> Lithium bears doubt Tesla or Electric cars, or simply cite the last bubble and assume they have it all figured out. They don’t understand backup batteries used in Industry or in Renewable Energy. They simply won’t acknowledge that the carbon taxes and environment pressures in politics are forcing the hand of countries to develop renewable energy.

These energy or commodity “experts” don’t understand the Ceramics & Glass growing demand and never talk about it. These “experts” don’t understand warehousing and the Lithium batteries powering tow motors or forklifts, they forget about phones / laptops / tablets / power tools / RC toys / Drones / Airlines, and all the other areas batteries show up. The emerging world will only want more of these things, and that underpins this energy source.

Is Lithium a Bubble? No.

– A bubble implies the demand will peak and crash and nobody will want the inventory for a long time. That is simply not the case.

In about 1-2 years we’ll have a handful of real Lithium mines that are developed and will meet the supply needs of the planet. I’ve mentioned the 6 I think will still be around. As for the rest, it is not as likely, but maybe Lithium X, Dajin Resources, Bacanora, Houston Lake, or Critical Elements Corp may make it or get bought.

Rick Rule is one of my favorite speakers and I have all the respect in the world for his experience, knowledge and guidance. However, I take everything and expert says with a grain of salt, and he simply does not have a grasp on the Lithium demand picture, the companies in the space, and needs to stick with Gold, Silver and the PGMs.

As for the Lithium space I’d agree that 80% of the companies jumping on board the popular trend are marketing fluff and sham. However, there are legitimate companies in the space that have weathered the storm and are moving into production. So like in the JR explorers in Gold, Silver, Copper, Oil, or really any commodity being mined, it is crucial to separate the real companies from the nonsense.
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Lithium X to me is a company that is full of fluff and marketing and I wrote about that recently:

Frank Giustra’s Lithium X has blown away all the other lithium stocks as far as percentage of share price movement, but as I’ve mentioned a few times recently, I am concerned about them just jumping on the band wagon and being “hype”.

Frank is followed by many as a successful business man, but their project is not in production or permitted for near-term production. It is not one I’m invested in at present and feel there are better alternatives.

The 4 big companies that control most of the supply in the Lithium space are Albermarle Corp (ALB), SQM [Sociedad Quimica y Minera De Chile] (SQM), FMC Corp (FMC) and Sichuan Tianqi (who bought out the first real Lithium only producer Talison Lithium back in 2013 that I was invested in at the time).

The question is how much more Lithium does the world need, and it irks me when everyone just focuses on the Tesla story or just Electric Vehicles. It just shows they don’t really understand the demand metrics. I posted 5 corporate presentations on last weekend’s show that had detailed slides highlighting where the demand is coming from, and it is MUCH bigger than just Tesla. I would highly recommend going back to last weekend’s show and looking at those if you are interested, because I even pointed out exactly which slides on their presentations unpacked the Lithium demand picture. When Rick Rule and John Kaiser dismissed it as fraud, it just showed they don’t really understand the demand drivers and probably shouldn’t be commenting on this sector until they so some more homework.

First of all, about 25% of the Lithium demand is for Ceramics & Glass (which I rarely hear anyone discuss). As the world continues to grow in population, this demand will increase. However the vision & growth story on these stocks is that they will be supplying the ever burgeoning battery markets and energy storage markets, so there is much more upside for Lithium demand than analysts even have accurate models for.

Analysts that don’t fully understand the Lithium picture tend to get fixated on electric cars & electric trucks, but they NEGLECT to cover the HUGE IMPACT OF BACKUP BATTERIES for storing the energy created in Solar & Wind base load power.

They also neglect to cover that corporations are starting to operate using BACK UP POWER at remote sites, for disaster recovery, and to handle energy created by their private solar and wind farms. What this means is a growing Lithium demand for batteries even if electric cars didn’t take off. The Renewable Energy sector stores its energy during peak performance in Batteries, so that it can provide stable power in off-peak times.

Then there is the entire developing world that will want smartphones / laptops/ tablets/ remote control toys like RC cars, RC planes, RC helicopters, and RC drones.

Then there is the Lithium batteries being utilized in the airline industries, or for powering tow-motors and forklifts in warehousing, or powertools and on and on….

The real question is – How much more Lithium supply does the world need to supply the battery marketplace in all it’s various applications?

As long as the discussion is just around Tesla, and people think it is all just hype, then there is a valuation gap and I like that. Until the discussion starts to include everything from Backup Batteries to Laptops to Airlines to RC drones, to power
tools, then it is a very lopsided and incomplete picture.

Let’s say the world need 6-8 mines outside of the big 3 chemical companies.

1) Talison Mining is still cranking out production in Australia owned by Chengdu Tianqi Industrial Group (Tianqi) and Albermarle. It was the first truly Lithium producer and was acquired in 2013. It showed the marketplace that a Lithium only company was viable [and then everyone forgot all about them or Lithum for the last few years]

2) Orocobre (OROCF) is in production and has proved itself thus far as the 2nd Lithium producer that was not just a big chemical company. Being early to the market, permitted and developed gives them a big advantage over their peers. They will either be acquired, or they will grow their production profile by acquiring smaller near-by exploration companies.

3) Galaxy Resources (GALXF) just went into production and is well funded and has key strategic partners and off-take agreements. Their stock was up very nicely this week.

Galaxy resources built the most advanced Lithium processing facility and Battery Plant in the world (Jiangsu). Unfortunately they developed it in 2012-2013 when the Lithium market fell apart, they had an employee death right after turning on the plant, and that tragedy shut them down for too long, and they ran into financial issues as a result.

So in 2014 Galaxy Resources announced that they were selling the Jiangsu Lithium Carbonate plant in China to Sichuan Tianqi Lithium Industries Inc (the same company that bought Talison, and they were processing Talison’s lithium anyway) and they wrapped that transaction up in 2015. Once they had the money from that sale they have focused on their assets acquired from Lithium One and now they are in production. That is a real success story, and I would disagree greatly that they are a “sham”.

4) Neometals (RDRUY) will produce spodumene concentrate from mid-2016 from its Mt Marion Lithium Project with partners Mineral Resources Ltd and Jiangxi Ganfeng Lithium Co., Ltd. It also has a 14% stake in the Galaxy Resources production mentioned above
Neometals is evaluating the recovery of titanium, iron and vanadium from its Barrambie project via a licenced proprietary hydrometallurgical process.

5) Lithium Americas Corp (LACDF) (previously Western Lithium) – If SQM (Sociedad Quimica y Minera de Chile SA) is doing this 50/50 JV with them, then I have to believe they are eyeballing Lithium Americas for a potential takeover down the road. SQM is one of the 3 primary producers of Lithium on Planet Earth, so I HIGHLY DOUBT that they would partner up with a “Sham.” I trust the due diligence of SQM and their team far more than Rick Rule, John Kaiser, or bloggers.
In addition, Lithium Americas currently produces lithium carbonate and Organoclay Hectatone for industrial and commercial purposes and has revenues being generated.

6) Pure Energy Minerals (HMGLF)– developing and finishing permitting – close to existing mine. What is funny is they actually have an offtake agreement with Tesla, and yet most are still unaware of them, but then a company like Lithium X brags it will supply Tesla, and everyone piles into it. Between the two, I chose to invest in Pure Energy Minerals because they actually have the off-take agreement and are much further along in their permitting and development process, and a much better value.

7) Nemaska Lithium (NMKEF) – developing and finishing permitting – close to existing mine. Nemaska really stole the show at the PDAC and was featured a few times in videos and as an up and coming Lithium development story. They were also one of the best performing stocks on the Canadian exchanges in their primary ticker.
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So those are the companies that either already are producing or are the near-term producers of Lithium. If the Lithium Batter marketplace does continue to prove itself, and isn’t usurped by a new technology, then we may need more mines, but how many?

So mines while mines 8 and beyond may never happen, here are the other companies shuffling for position:

Lithium X, Pilbara Mineral, Dajin Resources, Critical Elements Corp, Bacanora Minerals, Aberdeen International, Houston Lake Mining, Ultra Lithium, Lithium Exploration Group, Lithium Corp, Nevada Sunrise Gold, Nevada Energy Metals, Stria Lithium, America Lithium Minerals, Altura Mining, Li3 Energy, Standard Graphite, international lithium corp, Lithium Australia, Eureka Resources, MGX Minerals, Liontown Resources, Ardiden Ltd, Rock Tech Lithium, Avalon Advanced Materials, Sienna Resources, Mineral Resources Ltd, and Macarthur Minersals……

***(Can you see the dilemma and why people think it is getting a bit frothy?? 🙂 )
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Here’s a Composite Bar Chart of some of the Lithium Companies:

Lithium X, Galaxy Resources, Lithium Amercias Corp, Nemaska Lithium, Houston Lake Mining, Critical Elements Corp, Orocobre Ltd, Pure Energy Minerals, Dajin Resources, Bacanora Minerals.

http://stockcharts.com/freecharts/perf.php?LIX.V,GALXF,LACDF,NMKEF,HLM.V,CRE.V,OROCF,HMGLF,DJIFF,BCN.V&p=2&O=111000
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I’ll point out 3 other interesting companies:

– American Manganese Inc – They recycle Lithium Ion Batteries
– Electrovaya Inc – Lithium Battery manufacturer
– Oakridge Global Energy Solutions Inc – Lithium Battery Development stage company

Of those 3 I feel most confident in Electrovaya Inc. but thought it was worth throwing the other 2 on this post.

Cheers!