Getting on the EV Bandwagon
I have taken small positions in a number of EV related mining stocks. As I tweeted on the weekend, the catalyst to these additions were comments out of China about accelerating the move to electric vehicles.
another big step for EVs, time to be looking at Vanadium, Lithium, graphite again?: https://t.co/TQvR9pLoQW
— LSigurd (@LSigurd) September 10, 2017
In this post I’m going to briefly go through the positions I’ve taken. In a later post I will talk in a bit more detail about the one position (well two actually) that I think is the most interesting to talk about (the two companies, which soon will be one, are called Bearing Lithium and Li3 Energy). Note that I bought many of these positions earlier in the week, and some have run significantly higher since then. While I’m still holding all of them, they are in some cases less attractive now then they were earlier in the week, at least in the short term.
Albemarle (ALM) – They are the easiest way to play Lithium. They are a large producer. They are also expensive, trading at over 15x EBITDA. But I didn’t think I was going to get them any cheaper given the news from China.
Lithium X (LIX) – They have 20 % ownership in a deposit in Argentina. The deposit seems to have reasonably good Lithium concentration (500 mg/L). They are in the process of a feasibility study. The deposit is right in the middle of a Lithium corridor, with mines from SQM, Albemarle and Oro cobre. They also have a 20% ownership in Pure Energy Metals, which has a lithium deposit in Nevada. They have a $200 million market capitalization. Here is the company presentation.
International Lithium (ILC) – This one is a bit of a flyer. Well, they are all flyers but this one more than the others. They have a 20% ownership in a deposit in Australia as well as some early stage properties in Canada and Ireland. The lithium concentrate grade of the Australian deposit is low but the size is decent. Ganfeng Lithium, which is a lithium manufacturer in China, owns 17% of the company. TNR Gold owns 15% and management owns 14%. They have an $11 million market capitalization. Here is the company presentation.
Largo Resources (LGO) – They have a Vanadium mine. Vanadium prices have taken off recently, the latest numbers I can get has prices pushing $11/lbs, after averaging under $6/lbs in the second quarter and even less earlier in the year. The stock has moved a ton, and has moved another 20% since I bought. But if you run the numbers at $11/lbs Vanadium its still only at about 6x cash flow. Vanadium prices have spiked even higher in the past. I saw one chart that briefly put them over $20/lbs.
Leading Edge Materials (LEM) – I have always enjoyed listening to Jim Dines and he has been on the lithium/rare earth band wagon for some time. So when I started looking for rare earth stocks I went straight to google and typed in his name. Leading Edge is his recommendation. They have a graphite mine and processing facility in Sweden that appears to be nearing production of battery grade graphite. Graphite makes up 40% of a EV battery by mass. They have prospects for lithium and cobalt in Sweden/Finland. They also have a rare earth elements project in Sweden that they released news on today that appears encouraging. Leading Edge has a $65 million market capitalization. Their company presentation is here.
Bearing Lithium (BRZ) and Li3 (LEIG) – These two companies will soon be one, as Bearing is in the process of taking over Li3. Li3 has been cash strapped but owns 17.7% interest in a lithium deposit in Chile. I think of all the positions I’ve taken, I am the most excited about this one, as they appear very cheap compared to other juniors but I haven’t found a good reason for why, other than that Li3 has languished on the OTC and is cash strapped. I’m going to write this one up in more detail. If you want a heads-up on that, check out my recent Stockhouse posts on their bullboard.
Take look @ DNI Metals for graphite & SLL standard lithium
Thanks I will
Did you buy ALB too
I did. Its the only one I dared buy in any size!
what kind of position size in percent do you think makes sense for ALB and versus the small caps. Thanks.
All the small names are 1% or less and that’s just because of liquidity. I made ALB a 2.5% position.
thanks for the color. Did you see the KBLT write up on the VIC
I dont have a VIC membership unfortunately.
Have you looked at Sherritt? A real company with a poor balance sheet that happens to have a lot of its revenue from hot-hot-hot cobalt.
Thanks, I never thought of that. Good idea.
Looking at Sherritt now, it actually looks really interesting, both for the cobalt and the nickel. And cheap, under 5x EBITDA at current metal prices. Nice – thanks!
You’re welcome! There are definitively multiple levers to it, and I think the cobalt “story” gives them a chance to continue getting their house in order and see a much higher share price without as much of a lottery-ticket aspect as those cos without operating assets.
For a company like Bearing Lithium, what would strategy be? I see that POSCO owns a significant stake. Would some large company simply buy them up for like a big premium to get the exploration rights? I assume they will not finance it themselves?
Btw, if you constantly ask yourself what I am missing? And you cannot find anything, often the best course of action is to buy buy buy instead to keep doubting yourself 🙂 . I learned that from painful experience.
Sorry to spam your comment section, just squeeze in one more:
That could explain why it is cheap. Chilean government keeping a tight squeeze on production, not allowing significant revenue to come from their properties? Or possibly other lithium lots being allowed first, while companies like Bearing Lithium only allowed in 5-10 years?
Sorry I missed this comment until now. I think there is some risk with Chile but it depends on the government. if the maricunga deposit is as solid as I think it looks, I wouldnt be surprised to see the company gobbled up by a bigger player with more clout.
zinc as well: https://arstechnica.com/science/2017/05/a-zinc-battery-that-could-compete-with-your-favorite-rechargeables/
didn’t know lithium could be associated with Potash mining until now, although perhaps a bit too late to take a stake in SQM?
FMC also a way to combine a lithium/agri-food position