{"id":88101,"date":"2016-04-14T07:23:22","date_gmt":"2016-04-14T11:23:22","guid":{"rendered":"http:\/\/countingpips.com\/?p=88101"},"modified":"2016-04-14T07:23:22","modified_gmt":"2016-04-14T11:23:22","slug":"lithium-is-hot-most-things-are-not-nevada-energy-metals-inc-come-check-it-out","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/04\/lithium-is-hot-most-things-are-not-nevada-energy-metals-inc-come-check-it-out\/","title":{"rendered":"#Lithium is Hot, Most Things are Not, Nevada Energy Metals Inc., Come Check it Out"},"content":{"rendered":"
April 14, 2016<\/div>
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By Peter Epstein, CFA, MBA \u00a0\u00a0http:\/\/EpsteinResearch.com<\/a>\u00a0\u00a0\u00a0epstein.peter4@gmail.com<\/a>\u00a0<\/strong><\/p>\n

A rising tide is lifting many boats, still plenty of tide to ride\u00a0<\/strong><\/p>\n

Are the stars and planets aligned in the global emerging lithium sector? One would certainly think so, when looking at the performance of Australian-listed companies. Seven non-producers, one-year stock returns ranging from\u00a0257% to 1,369%, averaging\u00a0810%!\u00a0However, most, but not all, are relatively advanced, as far as juniors go.<\/p>\n

A few are slated to reach initial production this year or next. On the TSX Venture Exchange (TSX-V),\u00a0things have been\u00a0heating\u00a0up as well. In the past 3 months, a group of 4\u00a0have soared\u00a0between\u00a0106% to 266%, averaging about\u00a0180%. [Source: Google Finance<\/em>]. How crazy are these astonishing\u00a0moves? Crazy for sure, but how crazy is it really? I mean, could the electric transportation market be any stronger? Did anyone expect that lithium prices would triple\u00a0from just\u00a06 months ago?<\/p>\n

In budding bull markets, things move fast\u2026. Are we in a lithium bull market?<\/strong><\/p>\n

Spot prices in excess of 130,000 Yuan\"Screen\u00a0(US$20,000\/Mt) [Source: 4\/12\/16\u00a0<\/em>article on ChinaDaily.com.cn<\/a><\/em>]\u00a0proves \u00a0the existence of a pronounced undersupply in the market, if not a longer-lasting paradigm shift in Li-ion battery demand.\u00a0In an\u00a0<\/a>interview<\/a>\u00a0I conducted\u00a0a few\u00a0weeks\u00a0ago of Malcolm Bell, one of the\u00a0Company\u2019s Technical Advisors, he described how\u00a0Nevada Energy Metals<\/a>\u2018<\/a>\u00a0TSX-V:BFF\u00a0(OTC: SSMLF) (Frankfurt:\u00a0A2AFBV)\u00a0team sees remarkable opportunities to stake and acquire prospective properties. A key takeaway shared by Mr. Bell and management is that other \u201cClayton Valley-like\u201d closed basins containing enriched brines could still be found. It\u2019s not the zip code that matters most, but the geological setting and\u00a0history of\u00a0volcanic activity.<\/p>

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Staking ground is highly\u00a0cost-effective, it conserves cash liquidity. Staking also sidesteps onerous third-party directed exploration and work requirements. The Company\u2019s growing portfolio of lithium assets diversifies exploration risk. Low cash burn and business plan flexibility are hallmarks of a successful prospect generator model. Make no mistake, this Company is highly speculative, but it\u2019s unassuming market cap and tremendous exposure to lithium prices, makes it a compelling risk-adjusted vehicle for those bullish on the industry.<\/p>\n

The prospect generator model works in both bull & bear markets<\/strong><\/p>\n

These days, many companies are masquerading as lithium plays, but really they\u2019re just\u00a0squatting\u00a0on land, hoping to sell or joint venture it ASAP. Perhaps not a bad idea, but the clock is ticking, there are holding costs involved. Many do not have the financial means, managerial experience or a competent business strategy to create shareholder value. That\u2019s clearly not the case here. Look no further than yesterday\u2019s\u00a0announced acquisition\u00a0of 60 claims (approximately 1,200 acres\/484 hectares<\/em>) in Clayton Valley, Esmeralda County, Nevada.\u00a0The\u00a0Clayton Valley BFF-1 Lithium Project\u2019s (\u201cBFF-1\u201d)\u00a0southern boarder is 250 meters from\u00a0Albemarle Corporation\u2019s\u00a0Silver Peak lithium brine operations.<\/p>\n

Another promising exploration target<\/strong><\/p>\n

Clayton Valley\u00a0is an internally drained, closed-basin, surrounded on all sides by mountains, hills & ridges. It contains an underground aquifer system which is host to trapped lithium-enriched brines.\u00a0The decision to acquire BFF-1 was based on descriptions of geological modeling & historical drill results contained in a report by J.B. Hulen, PG,\u00a0(July 31, 2008<\/em>), in which he concluded that the area underlying the acquired portion had its\u00a0highest subsurface temperatures.<\/p>\n

A drill hole in 2007 by Western Geothermal Partners, returned 25 feet (from 280 to 305 feet<\/em>) of volcanic ash. According to the press release,<\/p>\n

\u201cThis unit may be correlative to the Main Ash Aquifer, which is a\u00a0marker bed\u00a0in other areas of the Clayton Valley Basin.\u201d<\/em><\/p>\n

So, here we have it, proof positive that\u00a0promising properties are still available for those smart and nimble enough to take action. Management is actively pursuing\u00a0additional exploration targets in the state.<\/p>\n

Could Nevada Energy Metals be the next high-flying lithium stock?<\/strong><\/p>\n

Over the past 3 months, Nevada Energy Metals\u2019 stock is up a healthy 60%, but that\u2019s just a third as much as the TSX-V group mentioned above. Yet, this Company embodies the true essence of a (high risk\/high reward<\/em>) emerging lithium company; a pure-play Nevada project generator of\u00a0lithium-brine assets<\/em>, with valuable long-term optionally on lithium pricing, demonstrated strong financial backing and a cheap valuation.<\/p>\n

While hard rock spodumene, mostly in Australia, is a big part of the market\u2019s\u00a0near-term\u00a0supply\u00a0growth, concentrated\u00a0lithium\u00a0brines, mostly found in the, \u201cLithium Triangle\u201d of Argentina, Chile & Bolivia, AND\u00a0Nevada\u00a0\u2026.\u00a0are expected \u00a0to meaningfully contribute to longer-term supply. New\u00a0processing technologies in the works today, could make brine harvesting even cheaper than it already is compared to hard rock mining.<\/p>\n

\"Screen<\/p>\n

At the very center of any bullish lithium-brine thesis, is the great State of Nevada, USA, host to one of the very few known economic brine concentrations outside of South America. Nevada is the 3rd\u00a0best\u00a0mining jurisdiction\u00a0on the planet. [Source: \u201cFraser Institute Mining Survey<\/em>,\u201d 2015] It offers a lithium triad of\u00a0geographic&\u00a0geopolitical\u00a0diversification away from Australia, Argentina Chile & China,\u00a0as well as\u00a0geological\u00a0\/ processingdiversification in the form of\u00a0brines vs hard rock.<\/p>\n

Nevada, a combination of geopolitical + geographic + geological diversification = Security of Supply<\/strong><\/p>\n

Like very successful newcomer\u00a0Lithium X Energy, management intends to raise capital to execute even more ambitious corporate initiatives. A successful raise would enable it to have the best shot possible of locking down\u00a0promising properties and pursing prospective tuck-in acquisitions. Each asset owned, controlled and optioned, stands to benefit from company-wide infrastructure and corporate overhead synergies, a key characteristic of the project generator model.<\/p>\n

If Nevada\u2019s, \u201cLithium Hub\u201d hosts an economically viable source of new supply, it would be impossible to ignore a company like\u00a0Nevada Energy Metals. In addition to the favorable attributes already mentioned, the Company would offer something even greater,\u00a0Security of Supply\u00a0in the U.S. market.<\/p>\n

With this in mind, readers should take a closer look at the Company. As yesterday\u2019s press release demonstrates, management is aggressively, yet prudently, building its lithium portfolio in an efficient and cost effective manner. The Company\u2019s project generator model involves the active pursuit of not just potential lithium-bearing properties, but also mutually beneficial joint ventures and farm-outs, serving to\u00a0minimize cash burn<\/em>.\u00a0This strategy is a tried and true one among emerging natural resource companies around the world.<\/p>\n

Valuation<\/strong><\/p>\n

Speaking of relative valuation, unlike some companies that have already exploded higher by hundreds & hundreds of percent, the Company still offers an attractive risk\/reward proposition. Perhaps under appreciated here is the strong financial backing of shareholders, most notably, Ron Loewen. I conducted an interview of Mr. Loewen in mid-March.\u00a0[See interview here<\/a>].\u00a0Reasoning that January 20th<\/span><\/span> marked the low in the cycle, Loewen recommended taking on more risk, especially in emerging lithium companies.<\/p>\n

This is hugely important, it\u2019s what separates the wheat from the chaff, or potentially, the lithium from the ground. Without demonstrated financial resources, even the best prospects are dead in the water, awaiting an opportunistic takeout at a mediocre valuation or worse.\u00a0By contrast, with each acquired property, Nevada Energy Metals\u2019 fundamental valuation is increasing. And, the share price is likely (in my opinion, not a forecast by the author or management team<\/em>) to catch up in due course.<\/p>\n

Nevada Energy Metals has 72.4 million shares outstanding, for a market cap of roughly\u00a0[C$11.9 million \/ US$9.3 million].\u00a0Compare that to 3 pure-play, Nevada\u00a0focused\u00a0 TSX-V listed companies (not\u00a0including\u00a0Lithium Americas,\u00a0as its primary asset is in Argentina<\/em>) with an average market cap of about [C$45 million \/ US$35 million]. Should Nevada Energy Metals be trading at nearly a 75% discount to the\u00a0average? I think this relative valuation could change in a heartbeat, especially if additional\u00a0acquisitions and staking is in the pipeline.<\/p>\n

Small cap natural resource companies coming back\u00a0into favor?<\/strong><\/p>\n

\"Screen<\/p>\n

Many companies are enjoying April-to-date stock price returns\u00a0like nothing I\u2019ve seen in quite some time. Just a few examples, in sectors other then lithium.\u00a0NuLegacy Gold\u00a0+85%,\u00a0SantaCruz Silver\u00a0+77%,\u00a0Lucas Energy\u00a0+82%,\u00a0Alabama Graphite\u00a0+58%\u00a0and\u00a0NexGen Energy\u00a0(uranium<\/em>)\u00a0+50%.\u00a0Stock price performance has little bearing on fundamental trends, but to the extent\u00a0that\u00a0speculative small-cap stocks frequently spike higher in short periods of time, the market might be signaling a window of opportunity. Caveat emptor, my\u00a0technical\u00a0analysis\u00a0skills are non-existent, and my investment horizon is months, not days.<\/p>\n

With the 4+ year bear market in natural\u00a0resource stocks possibly ending, new money\u00a0earmarked for well\u00a0positioned companies could pour in sooner rather than later. Will\u00a0Nevada Energy Metals\u2019<\/a>\u00a0TSX-V:BFF\u00a0(OTC: SSMLF) (Frankfurt:\u00a0A2AFBV)\u00a0be a recipient of a wave of investment dollars?<\/p>\n

Conclusion<\/strong><\/p>\n

Nevada Energy Metals is a pure-play, Nevada\u00a0focused, lithium-brine exploration company operating as a project generator, with a market cap of just [C$11.9 million \/ US$9.3 million]. The Company has accumulated 4\u00a0distinct lithium targets, prudently diversifying the early-stage exploration risk of its Nevada portfolio. Yet,\u00a0this is just the\u00a0beginning. The Company has proven again and again the ability to move quickly and cost effectively. Management plans to raise capital to continue its\u00a0successful growth, and pursue larger\u00a0opportunities.<\/p>\n

Besides Argentina & Chile, there are very few enriched lithium-brine operators or explorers. Given incredibly robust Li-ion battery demand, as evidenced by soaring prices, Nevada\u2019s Lithium Hub could become a\u00a0meaningful supplier. If one believes strongly in the future of electrified transportation and residential, commercial & grid-scale energy storage systems, then Nevada Energy Metals is a compelling way to articulate that investment view.<\/p>\n

\"sp-banner\"<\/a><\/p>\n

For more information, about\u00a0Nevada Energy Metals:<\/p>\n

Company website:\u00a0http:\/\/www.nevadaenergymetals.com<\/a><\/p>\n

Trading Symbols: TSX-V:\u00a0BFF<\/a>\u00a0\u00a0OTC Markets:\u00a0SSMLF<\/a>\u00a0Frankfurt\/Xetra:\u00a0A2AFBV<\/a><\/p>\n

Twitter:\u00a0https:\/\/twitter.com\/NVEnergyMetals<\/a><\/p>\n

Facebook:\u00a0https:\/\/www.facebook.com\/NevadaEnergyMetals\/<\/a><\/p>\n

Disclosures<\/u>:\u00a0Readers are charged with conducting their own investment due diligence and recognize that small cap stocks can deliver a 100% loss of one\u2019s investment capital. The author or interviewer as the case may be, Peter Epstein, CFA, MBA, believes that he\u2019s diligent and prudent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities. However, he cannot guarantee that his efforts will (or have been) successful.\u00a0Readers understand that Mr. Epstein cannot be held accountable or responsible for the accuracy of opinions, facts, estimates, forecasts and assumptions conveyed herein, or for investment actions taken by readers.<\/em><\/p>\n

At the time this interview was published,\u00a0Nevada Energy Metals\u00a0was a sponsor of EpsteinResearch.com.\u00a0Mr. Epstein owns stock in the Company. Mr. Epstein is not a registered or licensed financial advisor. His article(s) on Nevada Energy Metals and other small cap companies should be considered very carefully\u00a0in this context. Readers are urged to consult with their own financial advisors before making investment decisions. This company,\u00a0and all small cap companies,\u00a0are highly speculative, not suitable for all investors.\u00a0<\/em><\/p>\n

Any\u00a0commentary suggesting that a particular stock is, \u201cunder valued,\u201d \u201cover-sold,\u201d a \u201ccompelling opportunity,\u201d is \u201cde-risked,\u201d could be \u201cre-rated,\u201d or similar words and phrases, are not directed at any individual or group, and do not\u00a0constitute investment advice. Each individual and group must make their own determination regarding the suitability of any stock mentioned herein. Any comparisons between or among stocks are for illustrative purposes only and are not be taken as fact or relied upon. Nothing herein is to be considered explicitly or implicitly a part of full and proper due diligence.<\/em><\/p>\n

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Risk Disclosure:<\/b> Foreign Currency trading and trading on margin carries a high level of risk and can result in loss of part or all of your investment. Due to the level of risk and market volatility, Foreign Currency trading may not be suitable for all investors and you should not invest money you cannot afford to lose. Before deciding to invest in the foreign currency exchange market you should carefully consider your investment objectives, level of experience, and risk appetite. You should be aware of all the risks associated with foreign currency exchange trading, and seek advice from an independent financial advisor should you have any doubts. All information and opinions on this website are for general informational purposes only and do not constitute investment advice.<\/p>\n

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

By Peter Epstein, CFA, MBA \u00a0\u00a0http:\/\/EpsteinResearch.com\u00a0\u00a0\u00a0epstein.peter4@gmail.com\u00a0 A rising tide is lifting many boats, still plenty of tide to ride\u00a0 Are the stars and planets aligned in the global emerging lithium sector? One would certainly think so, when looking at the performance of Australian-listed companies. Seven non-producers, one-year stock returns ranging from\u00a0257% to 1,369%, averaging\u00a0810%!\u00a0However, most, […]<\/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-88101","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/88101","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=88101"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/88101\/revisions"}],"predecessor-version":[{"id":88129,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/88101\/revisions\/88129"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=88101"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=88101"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=88101"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}