Sunday, August 22, 2010

Lithium Bull: Rest before the Charge TNR.v, CZX.v, RM.v, LIT, LIT.v, TSLA, HEV, AONE, CLQ.v, WLC.v, ABN.v, HAO.v, FMC, SQM,

  October, 2011 Lithium Investments update.

"Mineweb: Demand for lithium expanding as battery manufacturers make major investments

 Lithium investments story is getting to the headlines again. With the end of the world postponed today in Europe we still have the luxury of market prices for Junior miners and Lithium developers as in the near end of the world scenario. You can not step twice in the same river, but Mr Market has again provided us with a time machine and we can accumulate the Lithium juniors at the very attractive valuation. Catalyst will be the more Electric Cars on the road, soft lending in China and the price of Oil above 80 dollars. Insiders are already signalling that the value is there - at least according to their personal view."

Investing in Lithium.

BHP, with its bid for Potash POT is making the news and markets today. There is still money to be made in this story, but for us it is yesterday's news. Investors, like Robert Friedland, have made money on the potash story already a few years ago and now we are too looking for the next trend in order to get a comfortable  position early in the game to capitalise on it.
  Today, with the recent news from China we are looking for further confirmation in the Lithium marketplace about the advance of Lithium Second Leg Up in this generational Bull market.

"China to Invest Billions in Electric and Hybrid Cars. Nothing will be left to a chance in this methodical execution of the state-level plan in China: transformation of the country's transportation system into the base of 21st century clean tech industrial revolution to further power its rise. China has already surpassed Japan as a second largest economy in the world and it is the largest auto market now.

Now you can see a few details of state level planing in China: they have capital to invest with reserves over Two Trillion US Dollars, thousands of engineers with annual salaries compared to monthly ones in the West and, the most important, political will to implement the far going geopolitical plan to get rid off the Oil Hook. We are out of the politics and our idea is to define Macro trends and position ourselves early enough to capitalise on it.

Global rare earth element production (1 kt=106...Image via WikipediaThe last piece in this game against Peak Oil (or fading American domination connected to the control of Oil in the world) is to have secure supply of strategic commodities for this technological advance. Here China already controls 97% of market in Rare Earth Elements and now it is time to build up position in Lithium. If in the beginning of Lithium Bull last year mostly Japanese companies were very active in junior mining space where small companies are controlling resources, now more and more reports from the juniors suggesting that Chinese companies are on the road."

SQM is one of the few Majors, and being the largest among Lithium Brine producers, it can not really be a simple proxy for investing in lithium. This is due to the fact that only part of its revenue comes from Lithium, as it is a Potash producer as well.
  The market does not pay any heed to it and the big money is still coming into this play now after the stock has hit bottom this summer. More information on Lithium Brines: Potash ABC is here. Performance from the markets meltdown low in late 2008 is very impressive for the size of the company and stock is close to the highs of 2008. We are not following the Majors here with our money and you can find plenty of information on this company on the web.

FMC is another Major in Lithium space. The company produces Lithium and Potash from the brines in Argentina. Stock is in a clear uptrend now from the 2008 low. As you know, we are going with our money where the supply chain begins in Lithium with Junior mining companies.
  It's much more risky, but the reward is based on a very high leverage of exploration and development plays in these micro cap companies. If our investment thesis is wrong or we chose the wrong company, the end game will be brutal to our investment outcome - therefore you have to know what you are doing. Today we will discuss our lithium hit list below: all these companies are in the Byron Capital Lithium Index and we own these stocks or have owned them  before. The game here is based on the combination of the rising price of underlining commodity (Lithium Bull this time), multiplied by the developments in this particular junior: exploration discoveries and resource definition with strategic partners involved and up to the M&A as it happened with Salares Lithium recently.
  As usual, please do not forget that we do not provide any investment advise on this blog.

As you already know, our top pick in Lithium space is TNR Gold with its coming spin out of International Lithium. You have Copper, Gold and Lithium in one portfolio of properties holding by this one company. Do your own DD particularly here - we have a position in the company - nothing should be taken as an investment advise here, we are biased, but you can still find a lot of information about the company on this blog.
  The company is followed now by Jay Taylor and Richard Mills. The stock is building  its upward momentum from the recent double bottom this summer, and after announced developments on its major lithium brine project in Argentina. Insiders are buying more shares and the company is raising capital for its pre IPO financing. Investors coming on board will give us another hint on the future development of this company. The most important value play will be in TNR Gold's ability to position the International Lithium portfolio of properties among strategic partners in order to rapidly advance Mariana into development stage and make a consolidation of projects in Nevada for US based Lithium development play.

"We have another hint into the recent M&A activity in Lithium space. Talison deal with Salares Lithium confirms real Chinese appetite for Lithium. Now it is time for Lithium Supply - China already controls 97% of Rare Earths market. Lithium output will be increased fivefold in Chinese Lithium province, but the real news is below from Reuters - it is only half of previously expected output and now Chinese companies are on the shopping spree among lithium developers. Who will be at the boardroom table next - only a few lithium brines plays are left without J/V partners and we are following here two of them: International Lithium and Rodinia Lithium. We expect M&A activity in lithium space to be continued during this summer months."

Rodinia Lithium is an another junior mining lithium developer on our M&A screen. The stock was recently under pressure and is still in its consolidating pattern. Recently, the company's president has left the company and a few phone calls are warranted to understand the situation and who is backing the company now. The company is raising 5 mil announced financing and its portfolio includes lithium brines in Argentina and Nevada. It was recently on a media roll out promoting its story:

"One of the lithium exploration and development companies that is moving as fast as possible to capitalize on the burgeoning demand for lithium, particularly in the United States, is Rodinia Lithium Inc. (TSX: V.RM, Stock Forum).
The company’s President William Randall believes that a supply squeeze is on the horizon, and this 21st century metal will becomes an increasingly “strategic commodity” for the U.S. industrial sector. This is why Rodinia wants to help ramp-up future lithium supplies in the U.S. by developing America’s next prospective lithium mine."

Lithium One has made recently a deal with Korean Kores to develop its lithium brine project in Argentina. Technically company is out from dating list for any M&A activity now, but potential upside could be still there with coming liquidity into the lithium space after launch of lithium ETF LIT.

"We have another confirmation today of money flow into Lithium sector when Lithium One announced a J/V deal with Korean company Kores on its Lithium Brine Salar project in Argentina. Now we have deals in place with Magna, Toyota, Posco and Kores to advance lithium brine projects in Argentina. It is very important that Lithium end users prefer to secure supply of Lithium and not wait OPEC style Lithium cartel to be formed by existing producers like SQM, FMC and Chemetall. Chinese are very active in Australia and Japanese and Koreans in Argentina now. There are not a lot of quality projects left in the area. Everybody is looking for low cost potential production from brines and only few companies with credible teams are involved in the sector. Early stage Mariana Lithium Brine Salar of International lithium Corp. could be well on the radar screens now for potential J/V interests with ongoing exploration program."

Western Lithium used to be the media darling in lithium junior mining space with its lithium deposit in Nevada. The company has a number of investment banks following it and used to have a strong institutional shareholder base.
  The problem here is that this deposit is lithium bearing clay and, we think that the game of the moment is Lithium Brine as the most economical way of lithium production. Company claims a very attractive cost for future production with credit from other products, but it need to be confirmed. Western Lithium is advancing now the pilot production plant to address this concerns. We will finish our excursion today in the land of next big thing with a quote from our Macroview on Microcap - we wish you a pleasant and educational journey:

"Just a few more numbers to get you focus Macro into Micro:

114,000,000,000,000 Total US Governmet Obligations

57,000,000,000,000 Total market cap of all world traded companies, May 2008.

12,092,672,900,402 Total US public Debt Outstanding

4,000,000,000,000 To be financed by selling Treasuries next year.

600,000,000,000 Payments for oil by U.S. to foreign companies in 2008.

265,040,000,000 Microsoft Market Cap

220,000,000,000 Philadelphia Gold and Silver Index

208,230,000,000 Walmart Market Cap

190,000,000,000 Amex Gold BUGS (Basket of Unhedged Gold Stocks) Index

10,390,000,000 The world's largest lithium producer Market Cap, SQM

800,000,000 Lithium Carbonate Market annual sales.

190,000,000 Market Cap of Top 5 Canadian Lithium exploration companies.

2.2% Yield on 5 Year Treasury Note

More then 50% of U.S. Debt is now in the hands of the foreigners."

Gold is up from that moment to over 1200 USD/oz - who knows, maybe our lithium dreams will be taken seriously by all those freshly printed money one day again as well? We will keep you posted.

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