{"id":103736,"date":"2017-03-21T10:44:14","date_gmt":"2017-03-21T14:44:14","guid":{"rendered":"http:\/\/countingpips.com\/?p=103736"},"modified":"2017-03-21T10:44:14","modified_gmt":"2017-03-21T14:44:14","slug":"nrg-metals-a-good-lithium-bet","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/03\/nrg-metals-a-good-lithium-bet\/","title":{"rendered":"NRG Metals, a Good #Lithium Bet?"},"content":{"rendered":"
March 21, 2017<\/div>
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By<\/strong>\u00a0Peter Epstein,\u00a0CFA<\/span>\u00a0\u00a0\u00a0epstein<\/span>.peter4@gmail.com<\/a>\u00a0\u00a0Epstein Research [ER]<\/a><\/b><\/p>\n

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After massive moves in Lithium (\u201cLi\u201d) juniors last year, will history repeat?\u00a0 Who knows, there will be big winners in 2017, but far fewer.\u00a0 Investors\u00a0learned<\/span>\u00a0a lot about\u00a0which stories have a chance and which likely don\u2019t.\u00a0 For example, if one is invested in an\u00a0Esmeralda County, Nevada\u00a0(host of the Clayton Valley basin<\/em>) Li play, it might be time to take a closer look.\u00a0 Why?\u00a0 The superpower in the area,\u00a0Albemarle<\/span>\u00a0Corp.,\u00a0[NYSE: ALB]\u00a0believes it has a senior claim on\u00a0ALL\u00a0water rights in the basin.<\/p>\n

Water rights and\/or lack of scale will be the downfall of dozens of hopefuls in western States.\u00a0 This is also true (for the same and other reasons<\/em>) in many jurisdictions of Canada, Australia & Argentina (\u201cARG\u201d).\u00a0 Investors looking for good ideas should pay particular attention to\u00a0ARG<\/span>.\u00a0 For some, that might mean development-stage companies like\u00a0Lithium Americas [TSX<\/span>: LAC]which owns 45.75% of a very strong project,\u00a0Cauchari<\/span>–Olaroz<\/span>,\u00a0(alo<\/span>ng<\/span>\u00a0with 45.75% partner\u00a0SQM<\/span>\u00a0[NYSE:\u00a0SQM<\/span>]<\/em>) in\u00a0Jujuy<\/span>\u00a0Province.\u00a0 Or,\u00a0ASX<\/span>-listed\u00a0Galaxy Resources\u00a0[ASX<\/span>:\u00a0GXY<\/span>], owner of\u00a0the very promising\u00a0Sal\u00a0de<\/span>\u00a0Vida\u00a0project\u00a0on the western side of the\u00a0Salar<\/span>\u00a0del<\/span>\u00a0Hombre\u00a0Muerto<\/span>.<\/p>\n

Cheap valuation, world-class team, sizable Li brine option in Argentina<\/h3>\n

I\u2019m looking for juniors with\u00a0cheap valuations\u00a0PLUS\u00a01) strong management, 2) access to capital and 3) potential projects of scale. \u00a0NRG<\/span>\u00a0Metals Inc. [TSX<\/span>-V:\u00a0NGZ<\/span>] [OTC:\u00a0GPOFF<\/span>] stands out for its valuation (2nd\u00a0lowest\u00a0market cap of 15\u00a0ARG<\/span>\u00a0Li juniors\u00a0I track<\/em>) \u00a0Note: \u00a0{Valuation is more important than ever.\u00a0 Dozens of Li stocks are up hundreds or thousand(s) of percent, even after meaningful pullbacks from 52-week highs<\/em>}.\u00a0\u00a0NRG<\/span>\u00a0has a world-class management \/ technical team, and has gained control (through a low-cost option<\/em>) of nearly 30,000 ha in the\u00a0Salar<\/span>\u00a0de<\/span>\u00a0Carachi<\/span>\u00a0Pampa<\/span>.<\/p>\n

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I asked the following questions of\u00a0President, CEO & Director\u00a0Adrian\u00a0Hobkrik<\/span>.<\/strong><\/p>\n

There are ~20 junior lithium companies with property or project interests in Argentina. \u00a0Why should readers care about\u00a0NRG<\/span>\u00a0Metals?<\/h3>\n

That\u2019s a great question.\u00a0 Since there are many juniors competing for scarce resources, we strongly believe that controlling a basin will be critical.\u00a0 We have optioned 29,182 hectares (~72,100 acres) in the\u00a0Carachi<\/span>\u00a0Pampa<\/span>\u00a0basin (in the\u00a0Salar<\/span>\u00a0de<\/span>\u00a0Catamarca<\/span><\/em>),\u00a0a position we consider district-scale.\u00a0 Size matters, but even more important, vitally important, is having a strong technical team including people with direct Li brine experience in South America.\u00a0 We\u2019re funded through our upcoming drill program and believe our ability to raise capital is strong.<\/p>\n

You spoke of the vital importance of management, how does your team compare to that of peers that have larger market caps?<\/h3>\n

In a country like Argentina, boots on the ground is a\u00a0pre<\/span>-requisite for success.\u00a0 Six team members have mining experience in S. America, (4 fluent or native speaking, 3 with direct Li experience<\/em>) offering a range of valuable skills. \u00a0Jos\u00e9<\/span>\u00a0Gustavo\u00a0de<\/span>\u00a0Castro\u00a0is a chemical engineer, an expert in evaluating and advancing of projects, including 5 years as Country Manager at producer\u00a0Orocobre<\/span>\u00a0Ltd.,\u00a0responsible for the\u00a0development of the\u00a0Salar<\/span>\u00a0de<\/span>\u00a0Olaroz<\/span>\u00a0project.\u00a0\u00a0Jos\u00e9<\/span>\u00a0also held senior positions with the Argentine subsidiary of\u00a0FMC<\/span>Lithium [NYSE:\u00a0FMC<\/span>],\u00a0operator of S. America\u2019s largest lithium operation. \u00a0Note: \u00a0{Avg. market cap of 15\u00a0ARG<\/span>-focused\u00a0Li juniors = ~C$50 million, ~5x that of\u00a0NRG\u2019s C$ 9 million market cap 3\/22\/17<\/span><\/span><\/i>}.<\/p>\n<\/div>\n

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Fernando\u00a0Villarroel<\/span>\u00a0has 12 years\u2019 experience in the mining industry in Argentina focusing on lithium process development.\u00a0 From 2009 to 2013 he worked with\u00a0Lithium Americas\u00a0as Project Manager responsible for construction management &\u00a0commissioning of the initial pilot evaporation facilities and lab at\u00a0Cauchari<\/span>\u00a0Olaroz<\/span>. \u00a0Jos\u00e9<\/span>\u00a0Louis\u00a0Mart\u00edn<\/span>\u00a0is a\u00a0Phd<\/span>\u00a0in Geology with 35 years\u2019 experience.\u00a0 Dr.\u00a0Mart\u00edn<\/span>\u00a0served as the\u00a0Catamarca<\/span>\u00a0representative for\u00a0Galaxy Lithium\u00a0from 2010 to 2013, and participated in the development of the Feasibility Study for Galaxy\u2019s\u00a0Sal De Vida. \u00a0Note: \u00a0{See more detailed bios below<\/em>}<\/p>\n

How did you find the\u00a0Carachi<\/span>\u00a0property, and how were you able to quadruple NRG\u2019s initial land position to 29,182 hectares (72,100 acres)?<\/h3>\n

Initially we had 3,004 ha, (~7,420 acres), then we optioned an additional 3,383 ha (~8,360 acres) and announced the transaction.\u00a0 After a successful\u00a0VES<\/span>\u00a0survey, which formed the basis of the\u00a0NI 43-101 report<\/a>\u00a0(done by\u00a0Novaldo<\/span>\u00a0Rojas, the\u00a0QP<\/span>\u00a0for\u00a0Milllennial<\/span>\u00a0Lithium (TSX<\/span>-V: ML<\/em>), we decided to go after a dominant position in the basin.\u00a0 So, we re-negotiated with five parties and came up with a deal requiring a cash payment of only\u00a0US$173k<\/em>, for an option on, as you said, 29,182 ha (~72,100 acres).\u00a0 No further payments are due unless we like upcoming drill results.\u00a0 We believe, consultants believe,\u00a0salars<\/span>\u00a0in this area are related to the\u00a0Galan<\/span>\u00a0Caldera.\u00a0\u00a0Given the depth of the basin, if we hit decent Li values without chemical issues, we could be off to the races.<\/p>\n

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Please explain why you think your\u00a0Carachi<\/span>\u00a0Pampa<\/span>\u00a0property is an attractive prospect.<\/h3>\n

Based on a recent geophysical survey, there\u2019s a zone of very low resistivity \/ high conductivity that looks like it could be a zone of saturated\u00a0brines<\/span>.\u00a0 It begins at 70 m depth, dips to 300 m, is about 150 m thick, and is\u00a0open at depth and in all directions.\u00a0 At low cost, we can drill a few holes and see what we find.\u00a0 Our technical team can explore multiple targets at once until we find project(s) we like.\u00a0 Access to capital is key, we\u2019re in good shape on that front.<\/p>

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Might\u00a0NRG<\/span>\u00a0be interested in other technology metals?\u00a0 In other provinces or other countries?<\/h3>\n<\/div>\n
Our clear focus is on\u00a0Carachi<\/span>\u00a0Pampa<\/span>.\u00a0\u00a0That said, we\u2019re in discussions about Li brine properties\/projects in nearby\u00a0salars<\/span>.\u00a0 Our in-house expertise allows us to review multiple prospects brought to our attention.\u00a0 We\u2019re in no rush,\u00a0Carachi<\/span>\u00a0Pampa<\/span>\u00a0will keep us busy as we contemplate exercising that option.\u00a0 Regarding other metals, other countries, we would possibly look in Chile, but our skill set is geared towards Li brine deposits.<\/div>\n
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Management team bios<\/h3>\n
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Conclusion<\/h3>\n
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Readers be warned (or reminded<\/em>), Li juniors are\u00a0highly speculative, all of them. \u00a0NRG<\/span>\u00a0Metals Inc. [TSX<\/span>-V:\u00a0NGZ<\/span>] [OTC:\u00a0GPOFF<\/span>] is no different, but at least its valuation is much lower than that of (the average<\/em>) Li junior with property\/project(s) in Argentina.\u00a0 Less downside risk may be found in the shares of giant companies like\u00a0Tianqi<\/span>\u00a0Lithium Industries [China-listed:\u00a0002466.SZ<\/span><\/a>],\u00a0Jia<\/span>ngxi<\/span>\u00a0Ganfeng<\/span>\u00a0Lithium [China-listed:\u00a0002460.SZ<\/span><\/a>],\u00a0FMC<\/span>,\u00a0Albemarle<\/span>\u00a0and\u00a0SQM<\/span>, or\u00a0with development \u00a0\/ producing companies like Galaxy, Lithium Americas and\u00a0Orocobre<\/span>\u00a0Ltd. [ASX<\/span>: ORE].\u00a0\u00a0But, to have a possibility of out-sized returns, one has to accept incremental risk.<\/div>\n
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NRG<\/span>\u00a0has a very experienced Li team and is actively looking to diversity its portfolio with assets from neighboring\u00a0salars<\/span>.\u00a0 The Company prudently locked down dominant position of nearly 30,000 ha for under US$200k to take a shot at a potentially significant discovery.\u00a0 Make no mistake, this is an educated guess, not a sure thing.\u00a0 However, a technical team of this caliber would serve investors well by making as many low-cost educated guesses as they possibly can.<\/div>\n
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Disclosures: \u00a0The content of this article is for illustrative and informational purposes only.\u00a0 Readers fully understand and agree that\u00a0nothing\u00a0contained herein,\u00a0written\u00a0by Peter Epstein of\u00a0<\/em>Epstein Research<\/a>,\u00a0<\/em>[ER]\u00a0<\/em>including but not limited to, commentary, opinions, views, assumptions, reported facts, estimates, calculations, etc. is to be considered, in any way whatsoever, implicit or explicit investment advice. Further,\u00a0nothing\u00a0contained herein is a recommendation\u00a0or solicitation to buy or sell any security. The content contained herein is not directed at any\u00a0individual or group. Mr. Epstein and\u00a0<\/em>[ER]\u00a0are not\u00a0responsible, under any circumstances whatsoever, for investment actions taken by the reader. Mr. Epstein and\u00a0<\/em>[ER]\u00a0have never been, and are not currently, a registered or licensed financial advisor or broker\/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and they\u00a0do not\u00a0perform market making activities. Mr. Epstein and\u00a0<\/em>[ER]\u00a0are not\u00a0directly\u00a0employed by any company, group, organization, party or person. Shares of\u00a0<\/i>NRG<\/span>\u00a0Metals\u00a0are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks\u00a0can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they consult with their own licensed or registered financial\u00a0advisors<\/span>before making investment decisions.<\/em><\/p>\n

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At the time this article was posted, Peter Epstein owned shares in\u00a0<\/em>NRG<\/span>\u00a0Metals\u00a0<\/em>and the Company was a sponsor of<\/em>\u00a0[ER].\u00a0Readers understand and agree that they must conduct their own research, above and beyond reading this article. While the author believes he\u2019s diligent in screening out companies that are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful.\u00a0Mr. Epstein &\u00a0<\/em>[ER]\u00a0are not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. Mr. Epstein &\u00a0<\/em>[ER]\u00a0are\u00a0not expected or required to subsequently follow or cover events & news, or write about any particular company or topic.\u00a0Mr. Epstein and\u00a0<\/em>[ER]\u00a0are not experts in any company, industry sector or investment topic.<\/em><\/p>\n<\/div>\n<\/div>\n

\n<\/section>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

By\u00a0Peter Epstein,\u00a0CFA\u00a0\u00a0\u00a0epstein.peter4@gmail.com\u00a0\u00a0Epstein Research [ER] After massive moves in Lithium (\u201cLi\u201d) juniors last year, will history repeat?\u00a0 Who knows, there will be big winners in 2017, but far fewer.\u00a0 Investors\u00a0learned\u00a0a lot about\u00a0which stories have a chance and which likely don\u2019t.\u00a0 For example, if one is invested in an\u00a0Esmeralda County, Nevada\u00a0(host of the Clayton Valley basin) Li […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-103736","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/103736","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=103736"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/103736\/revisions"}],"predecessor-version":[{"id":103737,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/103736\/revisions\/103737"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=103736"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=103736"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=103736"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}