LITHIUM Stocks fertile ground

[nomis]

Nomis, sovereign risk is merely one of many assessment matters in buying into a company. As I said I rate Alkem which has a large project in the South Americas coming on, so that presents a geopolitical risk too.
I did hold Peak (PEK) and sold out simply because they were in Africa and a little uncertain in terms of the political space. That may have been a mistake but my equity is somewhere else I am comfortable with.
For most investors, they buy into a company with no knowledge of the management or their history, and that is just as high as a risk consideration.
So, no AVZ wouldnt pass the sovereign risk test, but that does not mean it shouldnt be a profitable or good company to invest in.

Thanks for replying, I've been in since 2017 as I was personally comfortable with the risk and it still suits my risk profile. I Like your strategy and appreciate you letting me pick your brains.
- Nomis

[Scrunch]

Yes RNU's share price has done very well. I had a cursory look a while ago and wasn't convinced it would get off the ground. The market price movement of RNU is saying it will. I'd gone with EGR for graphite exposure. There appears to be huge potential for EGR but to date, this potential hasn't been realised in share price movements.

The link below is a chart based analysis of six lithium stocks that have had really strong movements recently. Three of them were noted earlier ESS, GT1 & GL1. The other 3 covered are CHR, CRR & 1MC.
https://www.youtube.com/watch?v=QlGsS9a3304

These other three are:
CHR - Three asset areas - An interesting interplay with Core. South of Core's development there is an area where Core the entire area around what CHR has, and also recently took up an option over a piece in the middle of what CHR owns. CHR also has two other southern WA exploration areas.
CRR - A bunch of different prospects, but it seems to be Mavis Lake that is driving the value. They bought ESS's interest in this Canadian lithium play and ESS is now a shareholder
1MC - I've noted a bunch of different exploration projects but I'm not sure what bit is driving the value estimates.

So these stocks are not in the bargin basement undiscovered space. The issue is how do you value a tenement where there is a lot of hurdles to get into production, but if it was in production is probably worth >$1b. Its not easy and even small changes in the likely probability of getting into production create large value swings. Then there is the issue of not knowing how long lithium prices will stay as strong as they are and if the contract - where will they settle?

While GT1 (Canada) is yet to announce a JORC upgrade this is scheduled for Q2 2022. The Seymour lithium project is located in NW Ontario Canada, about 60km from the settlement of Armstrong and geographically slightly north of Lake Nipigon.

IMO they are a strong Junior Lithium miner. 20 reasons to consider GT1 are:
#1 Seymour ore has been successfully lab upgraded to battery grade of 99.52% (Its to Carbonate, rather than the Hydroxide occuring in Australia)
#2 Lab bulk test concentrate recovery rates are world-class. Using DMS 86.5% to 6.05% Spod, 81.7% to 6.92% Spod and Floatation 91.6% to 7.04% Spod (FFX has some report slides showing how strong this is relative to other miners) [Edit 19 Aug 2022 I now think these these are the recovery rates from the crushed and screened product. This makes them strong as they would be in the mid 70's when losses through fines are factored in. High enough to be commercial].
#3 The ore grade appears stronger than the 4.83Mt @ 1.25% JORC. The blended North Aubry rate within this is 1.38% and the weighted average of 3 recent drill holes is 1.51%
#4 Close to hydropower creating potential for "green lithium"
#5 Close to the major American market meaning Mine to Battery production could be measured in hundred's of KM's (for many others Spod miners its 10-20x that)
#6 GT1 have shown agility in their drilling execution and rapidly rolling out drilling (5,895m of DD completed since Dec21, another 7,100m commenced. Two rig's on-site)
#7 GT1 is one of a small set of lithium explorers with a hard-rock JORC resource that are not in advanced development plans
#8 A lot of untested pegmatites around Seymour
#9 Other strong sites to explore including McCrombe Prospect that has been drilled to an estimate of 2.297mt @ 1.3% but its not a JORC compliant estimate so isn't a JORC resource
#10 Directors include John Young (founding director at PLS) and Cameron Henry (Founding MD of Primero)
#11 Still early-stage in terms of market cap appreciation - Market cap is still only $152m (There are some restricted shares on issue so Direct broking $81.6m is incorrect)
#12 There is a tight share register. The top 20 make up 70% of shareholders. Due to repeated volumes like multiple @ 1.0m, the "top 20" from Nov21 was 43 shareholdings and 84.36% of shares on issue.
#13 Because DMS is a viable concentration method, startup capex is likely to be lower (less dilution). Core's 1.1Mt capacity plant from Primero was A$40m.
#14 Spod bearing Ore commences at or near the surface so start-up capital over-burden removal costs should be low and subsequent sustaining capex funded by operations
#15 Appears to have support of first nations peoples (Exploration approvals extended for 3 years)
#16 Recent references to North Aubry upper pegmatite imply a lower pegmatite has also been hit (size and grade are yet to be reported).
#17 The Ferland rail siding on the Canadian transcontential railway is only about 10km to the south
#18 The North Wisa prospect includes a 1.5km long stike with 0.4km for South Wisa. South Wisa has rockchips including 2.98%, 3.12% and 6.38%
#19 The strategic lithium footprint was expanded from 9,467ha to 35,576ha including new and adjacent zones
#20 As at 31 Dec 2021, GT1 had A$19.3m so substantial exploration can occur before any further Capital Raising is necessary

The main risks I'm aware of are:
#1 No certainty on how much larger the resource is
#2 GT1 are yet to get approval to mine (although the Ontario government recently put out a statement saying they were encouraging mining)
#3 GT1 are yet to get an off-take partner
#4 GT1 are yet to get finance for a mine
#5 GT1 are yet to release a DFS to improve clarity around potential returns
#6 GT1 are yet to release a FID confirming mining will actually happen and revenue generated

This is not investment advice an DYOR. Disc shareholder in GT1.

[SBQ]

@Scrunch:

As a Canadian that has lived through the decades of various 'mining fiascos' in Canada, I would not touch ANY junior / OTC:BB mining stocks in Canada for the simple reason, most of them fail. I recall the days when the Vancouver Stock Exchange (once touted as the scam capital of the world), full of mining companies issue nothing but bogus stations of their reserves, addresses on their filing forms of offices that do not exist.

Like in recent news in Serbia, again touted the largest lithium reserve in all of Europe, Rio Tino had lost out as the environmental impact was too severe. This will be no different in Canada as any mining development comes with strong headwind against environmentalists. China will not sit back, nearly all the global lithium conversion is done in China. Just because you can dig up a bunch of lithium compound out of the ground does not mean it's valuable. The tonnage has to be processed. You end up shipping it across the world to extract the lithium into battery grade standard in China because they have the slack environmental standards and can get the product to market at the lowest cost way.

Lithium stocks at an OTC level is VERY VERY speculative. Just my 2 cents.

[Scrunch]

@Scrunch:

As a Canadian that has lived through the decades of various 'mining fiascos' in Canada, I would not touch ANY junior / OTC:BB mining stocks in Canada for the simple reason, most of them fail. I recall the days when the Vancouver Stock Exchange (once touted as the scam capital of the world), full of mining companies issue nothing but bogus stations of their reserves, addresses on their filing forms of offices that do not exist.

Like in recent news in Serbia, again touted the largest lithium reserve in all of Europe, Rio Tino had lost out as the environmental impact was too severe. This will be no different in Canada as any mining development comes with strong headwind against environmentalists. China will not sit back, nearly all the global lithium conversion is done in China. Just because you can dig up a bunch of lithium compound out of the ground does not mean it's valuable. The tonnage has to be processed. You end up shipping it across the world to extract the lithium into battery grade standard in China because they have the slack environmental standards and can get the product to market at the lowest cost way.

Lithium stocks at an OTC level is VERY VERY speculative. Just my 2 cents.

Thank you for the insight its useful to know these other bits of background context. While operating in Canada, GT1 is an Australian company listed on the ASX and needing to comply with ASX listing rules. They are not an over the counter (OTC) listed stock subject to few if any listing rules. Yes OTC stocks are very risky and I have not invested in them. Typically I don't look to make new invests in OTC companies or companies below $50m market cap for that very small company reason.

The issue of environmentalists not wanting mining but wanting less ICE's is going to be an ongoing tension. I don't know how that is going to be resolved but one possibility is that mining plans involving toxic chemicals or have other undesirable characteristics become the target. A DMS concentration plant is at the less environmental impact end of the spectrum because it doesn't involve leaching with toxic chemicals.

The other interesting element that differs from many past mining boom-bust cycles is the sheer increase in volume lithium required if the world is to transition away from ICE's. My understanding is that by the late 2020's, projected world demand exceeds the total of both all in-production projects and all major proposed projects. This is likely to create an environment when an unusually large percentage of start-up projects are successful and also decreases the risks around a boom-bust environment (at least until the point in time supply does catch up with demand). The bust element typically occurring as high prices drive a lot of new production and this increase in production causes prices to tank with high cost and potentially mid-cost producers to have a problematic cost structure. Most of the time a 50% or 100% increase would create over-supply.

Also, while it hasn't been confirmed, the high recovery rates achievable from GT1 ore should mean they would be a low cost producer. Somewhere like Wodgina mining 1.2% ore with a 65% recovery is going to need to concentrate 7.7t of ore for 1t of 6% Spod [7.7*(1.2/6)*65% = 1]. If GT1 is processing 1.5% ore, it would need to process 4.7t of ore for 1t of 6% Spod [4.7*(1.5/6.0)*85%]. That's got to help the cost structure.

There is already discussion around Spod to battery grade lithium conversion facilities at Thunder Bay. This would mean China would not be part of the conversion pathway. Canadian Ore, Canadian (or American) conversion. American battery production and car production, hence earlier comments about a short distanced travelled from mine to battery.

[nomis]

And here we are booming to the next planet. Should shift the stock picks around a little in the comp. Go AVZ!

[JBmurc]

lithium-pegmatites-galore LRS!!!

https://www.3aw.com.au/latin-resourc...he-assays-say/

[SBQ]

Thank you for the insight its useful to know these other bits of background context. While operating in Canada, GT1 is an Australian company listed on the ASX and needing to comply with ASX listing rules. They are not an over the counter (OTC) listed stock subject to few if any listing rules. Yes OTC stocks are very risky and I have not invested in them. Typically I don't look to make new invests in OTC companies or companies below $50m market cap for that very small company reason.

The issue of environmentalists not wanting mining but wanting less ICE's is going to be an ongoing tension. I don't know how that is going to be resolved but one possibility is that mining plans involving toxic chemicals or have other undesirable characteristics become the target. A DMS concentration plant is at the less environmental impact end of the spectrum because it doesn't involve leaching with toxic chemicals.

The other interesting element that differs from many past mining boom-bust cycles is the sheer increase in volume lithium required if the world is to transition away from ICE's. My understanding is that by the late 2020's, projected world demand exceeds the total of both all in-production projects and all major proposed projects. This is likely to create an environment when an unusually large percentage of start-up projects are successful and also decreases the risks around a boom-bust environment (at least until the point in time supply does catch up with demand). The bust element typically occurring as high prices drive a lot of new production and this increase in production causes prices to tank with high cost and potentially mid-cost producers to have a problematic cost structure. Most of the time a 50% or 100% increase would create over-supply.

Also, while it hasn't been confirmed, the high recovery rates achievable from GT1 ore should mean they would be a low cost producer. Somewhere like Wodgina mining 1.2% ore with a 65% recovery is going to need to concentrate 7.7t of ore for 1t of 6% Spod [7.7*(1.2/6)*65% = 1]. If GT1 is processing 1.5% ore, it would need to process 4.7t of ore for 1t of 6% Spod [4.7*(1.5/6.0)*85%]. That's got to help the cost structure.

There is already discussion around Spod to battery grade lithium conversion facilities at Thunder Bay. This would mean China would not be part of the conversion pathway. Canadian Ore, Canadian (or American) conversion. American battery production and car production, hence earlier comments about a short distanced travelled from mine to battery.

The problem is where exactly will the battery production be located? No point building lithium conversion plants like in Australia or N. America when over 90% of the battery production is done in China. Shipping the tonnage of lithium from one continent to another is wasteful. I do not believe there will instantly be enough EVs to displace ICE vehicles. To do this is like a 50 year plan. Maybe it is viable to invest in lithium ventures like in Canada or in the US, but not without HUGE short term risk. I'm heavily invested in lithium stock but only with ALB because I firmly believe it's only the companies that have 'shovels in the ground' will benefit from the lithium boom over the next few years.

[Scrunch]

The problem is where exactly will the battery production be located? No point building lithium conversion plants like in Australia or N. America when over 90% of the battery production is done in China. Shipping the tonnage of lithium from one continent to another is wasteful. I do not believe there will instantly be enough EVs to displace ICE vehicles. To do this is like a 50 year plan. Maybe it is viable to invest in lithium ventures like in Canada or in the US, but not without HUGE short term risk. I'm heavily invested in lithium stock but only with ALB because I firmly believe it's only the companies that have 'shovels in the ground' will benefit from the lithium boom over the next few years.

I'm sure ALB will do well, particularly when its longer-term contracts roll over and something nearer current spot prices starts to come through as revenue. The FIF threshold is low at $50k and I don't want to be caught up in all the extra tax work that involves so I want to keep US listings to a low level. Ticking the boxes in the updated IRD website tool, Australian based companies listed on the ASX that have offshore operations appear to be ok (but this isn't tax advice).

Everyone says this boom is different, however it may be different this time. The increase in demand that a modest to high conversion rate of ICE's to EV's will require is measured in the high hundred's of percent. Current world production needs to increase but its not a 10 or 20% total increase, but that sort of increase every year for the next 10-15 years. This ongoing expected shortage is going to prevent prices falling back down to cost plus margins for a long time.

Re Australia - Yes there is a lot of point in building a lithium conversion plant in Australia. The process of convering Spod to Hydroxide substantially reduces the weight of the material that contains the lithium. This means a substantially reduced volume of material will need to be shipped from Australia to where-ever the production occurs. I suspect Hydroxide would be also suitable for containerised shipping rather than just bulk shipping. Shipping costs are a big issue when products are measured in cents/kg or only a few dollars per kg. Even if Hydroxide was only packed at one ton per square metre, a 40 foot container could hold 76.3 cubic metres (US$3.8m of product at US$50k/t). Shipping costs for hydroxide are not a big issue. There are also concept plans for a battery facility at Kwinana.

It will take time to build the production volume for ICE's but a heap of major auto makers have signalled partial or complete transition by dates from 2025 to 2035. This is no longer a 50 year transition plan.

The "huge short term risk" is mitigated by the current risk-reward balance. Also from what I've read, even if all the big planned projects (FFX, AVZ, LTR etc) go ahead, there is still a supply shortfall later this decade. That is going to create the environment where battery and auto makers look to secure supply by assisting promising start-up's much more than has ever occurred before in mining. IMO this will mean the normal situation of start-up's rarely getting into production will not be the case for those that successfully define an economic JORC sized resource. Economic sized JORC resources will typically either be taken over or assisted into production both create big gains for shareholders.

The battery production country mix is also on the way towards changing. A massive number of gigafactories are both planned and under development in Europe and America. A couple of days ago Stellantis and LG Energy announced plans for a $4.1b facility in Ontario, Canada. Stellantis is the combination of Fiat Crysler and PSA Group (Peugeot, Crysler, Opel, Citroen, Dodge, Maserati). That would put battery production a few hundred kilometers from the GT1 mine site. Plans also exist for Spod conversion facilities in Ontario.

[JBmurc]

https://www.asx.com.au/asxpdf/202203...1xphcwhwnk.pdf

LRS looks to have discovered something very special >> upto 3.22% Li

[SBQ]

@JBmurc: without a doubt, lithium investments will have a bright future. Coming from a background in mining in my younger years, i've come to know so many 'fly by nighters' of mining companies that come and go. Anything in the sub $5 or $10 share price range scares me.

They say for the next many years, the market index returns are going to be flat. But I doubt this will be the case for lithium. The demand is so high and will continue so for several years until the auto makers start finding a way to really produce EVs in a large enough level.

I think i've mentioned this before. The process of getting shovels in the ground is like 90% of the work. This is where I see most of these Jr mining stocks - lots of reports, more reports on environmental impacts, 1 assessment after another, then 1 year or 3 years later the mining company runs out of money. This is a game I want to steer clear away from and ALB fits that bill. Likewise with others like SQM and FMC.