If you are like me, you are scouring the internet trying to find information on the next up-and-coming lithium stock. There are a lot of good choices that have been recommended on this site and others such as Lithium X (OTCPK:LIXXF), Lithium Americas (LACDF), Nemaska Lithium (OTCQX:NMKEF), Orocobre (OTCPK:OROCF), Pilbara (OTCPK:PILBF), Altura (OTCPK:ALTAF), Galaxy Resources (OTCPK:GALXF), Bacanora (OTC:BCRMF), Neometals (OTCPK:RDRUY) and Critical Elements (OTCQX:CRECF). These are good investments now, but they would have been TERRIFIC investments if you bought them 2 years ago.
This article is about the “2 years ago” stocks.
It is hard to find good information about companies at the early stages of lithium development, and when you do find information, it isn’t significant enough to justify taking a position in the company. Most lithium junior miners fall into this category.
After extensive research, I took positions in the following 4 stocks. Is there enough information to justify my actions? Judge for yourself.
Sayona Mining (SYA:ASX) (OTCPK:DMNXF)
This Australian minor has tremendous upside potential, and amazingly, has gone unnoticed until now. Here we have a lithium junior with 3 brokers recommending it as a buy. That is unheard of for a company of this market cap. I’ll show the highlights here, but feel free to read the reports, each broker has done their due diligence.
Independant Investment Research has Sayona increasing approximately 8x in the next 12 months.
Source: IIR Sayona
Beer & Co. has Sayona increasing approximately 7x in the next 12 months.
Source: Beer&Co Sayona
And Patersons Has Sayona increasing about 4x in the next 12 months.
Source: Patersons Sayona
The table below puts the value of Sayona in perspective. They have a property that will produce in the near term, of good size and quality, yet they are much undervalued relative to peers. There seems to be a negative sentiment towards investing in Australian lithium miners, maybe because Argentina has had the lion share of lithium success to date. That is about to change, with Nameska, Pilbara, and Altura nearing production, the world is about to see how profitable pegmatite lithium miners can be. I foresee this happening one year from now, when Altura and Pilbara start turning a profit.
The Authier lithium project will allow Sayona to become a near term lithium producer, but what makes Sayona even more attractive are the unexplored assets they have in Australia. They have the options to own 80-100% of the pegmatite mineral rights of over 2000 square kilometers, much of which is in the proximity of Pilgangoora. Pilgangoora has one of the largest proven lithium resources in the world, and is mined by both Altura and Pilbara.
Sayona has experienced board members with both past and present lithium company experience. Sayona board members were part of the co-founding of Orocobre, and are directors of Altura which is set to begin production in Q1 2018 at their Pilgangoora Lithium Project in Australia.
One person on the Sayona Board may be the biggest advantage the company has in the pegmatite lithium mining business. Mr. Brown is a director on the Sayona Board and has been the CEO and managing director of Altura since 2010. Altura is starting production ahead of Pilbara. It is forecast to produce 27 kt of Lithium Carbonate Equivalent (LCE) per year from their Pilgangoora operation. Mr. Brown built Altura into a lithium producer, and I believe he will do the same with Sayona.
With a 4-8x upside in 12 months it is a wonder more people haven't noticed this stock. With a current market cap of 11.7M Australian (9.09M US), this company is on the verge of great things. Look at Altura and Pilbara, they were Sayona 2 years ago. Oh the thought of retiring and fixing up old Mustangs all day…
Advantage Lithium (CVE: AAL) (OTCQX:AVLIF)
Advantage Lithium is another lithium miner junior with a broker recommendation:
Source: Eightcapital Sayona
One of Advantage Lithium’s greatest assets is its management team. The board includes the CEO and the exploration manager from Orocobre. The CEO, Richard Seville, joined the board of Orocobre in 2007 as managing director and has brought Orocobre from an unlisted lithium junior exploration company to a lithium producing giant with a market cap of approximately 1 billion dollars. The exploration manager, Miguel Peral, was part of the team who explored Orocobre’s Salar Olaroz and other lithium brine targets in the area. Advantage Lithium is 35% owned by Orocobre, so it is in their best interest that Advantage succeeds.
Advantage’s resources at their Cauchari JV property are conservatively rated at .47MT, but this is likely many times smaller than the reality. They have 75% interest in the massive 28500 Hectare (110 sq miles) property.
Drilling is in process to expand the .47mt proven reserves to something closer to their neighbor Orocobre’s 6+mt resource. Before year end, we should have a better idea about the true resources size of Cauchari JV as the timeline shows below.
Source: AAL Presentation
Because of its unique relationship with Orocobre, Advantage may be able to use Orocobre’s facility at Olaroz to process raw brine, saving on the startup costs of their own facility. Also because of this relationship, Advantage can fast track their development leveraging Orocobre’s knowledge, resources, and connections in the area.
Advantage has other property with great potential. They own 100% interest in 13654 hectares (52 square miles) at Antofalla, which borders a lithium property owned by Albemarle. They own 100% interest in 9843 hectares (38 square miles) at Incahuasi, and they own 100% interest in 21,276 hectares (82 square miles) at Guayatayoc. Each of these properties has enough area to support a Brine operation. Advantage plans to adequately explore these properties in the coming year. These are excellent properties, each being of the size and caliber to support separate junior lithium companies.
Cauchari JV is the catalyst for the future of Advantage. Personally, I hope they choose to sell raw brine to Orocobre to be processed at the Olaroz facility, which borders Advantage’s property. This way they can quickly generate capital to de-risk the company, and fund exploration and development of their other promising assets.
Advantage has a market cap of approximately 60M US dollars, and it has everything in place to triple that over the next 12 months. After that, it could be the next Orocobre.
Dajin Resources Corp (CVE: DJI), (OTCQB:DJIFF)
This junior is a little more of a risk, as there is less information to leverage. However, like Advantage Lithium, they have a motivated partner to drive development of their 93,000 Hectares (359 square miles!) property in Argentina. They do lose 51% of the ownership in the deal, but having 49% of a profitable operation that size is hardly a concession.
Source: Salinas Grandes
Location is key for Salinas Grandes. The proximity to known high quality resources like Orocobre 6.4mt LCE, and of course Advantage Lithium’s about-to-be-proven resource make this property shine. There is likely a similar lithium resource content at Salina Grandes.
In the news it appears that Dajin has been more focused on their Nevada properties lately, content to allow their partners LSC lithium/Enirgi move the Salinas Grande property along. This isn’t a bad thing, as Dajin can focus on other endeavors while the value of their Argentina property grows, and if the value of that property grows, so does their stock price.
See below for a good article on Dajin and their partners:
Dajin also has significant properties in Clayton valley they may turn profitable. These and Salinas Grandes may be in production sooner than expected because of their partnership with Energi, who has spent 200 million dollars developing and proving out a process to extract lithium from brine, substituting the need for large evaporation ponds. With water rights difficult to obtain in Nevada, this technology could be the difference that propels Dajin past other Nevada lithium hopefuls.
Source: Enirgi Dajin press release
With a market cap of 13M US dollars, this stock will break out, it is only a matter of time.
NRG Metals (CVE:NGZ) (NRGMF)
NRG is like Dajin, with a lack of broker recommendations and minimal information. What made them stand out was their property and their management.
They have great property in the Argentina lithium triangle. They have options in Salar Escondido, which is massive at 29,180 hectares (112 square miles)
Source: Salar Escondido Project
And Hombre Muerto which consists of 3287 hectares (12.7 square miles)
Source: Hombre Muerto Project
The Hombre Muerto property alone is a good reason to consider this company, because it shares the same salar as a lithium carbonate production facility owned by FMC. However, Salar Escondido is what will propel this company to great heights. NRG's management team has high expectations for the salar, and drilling is in progress now to prove the value of the property.
The biggest reason I like NRG is their management team. The COO of NRG, Jose Gustavo de Castro, was country manager for Orocobre in Argentina until 2015. He grew the operation from 10 employees to 800 in construction, then 200 in operation. One of his accomplishments is the exploration and development of the Orocobre Oraloz lithium project into commercial production. Others on the management team came from Lithium Americas and Galaxy resources.
Source: NRG management
Having an asset like Mr. de Castro is a rarity. With someone of this caliber involved, the goal of becoming a lithium producer becomes attainable. He has the experience to move a project from exploration stage to production. Ultimately, this man is why I took a position in NRG.
NRG provides more press releases than most small lithium miners I have seen, which is always a plus. At a market cap of 11M US dollars, this stock might turn into another great success story.
Further reading on NRG: Epsteinresearch NRG Metals
As lithium turns into the new oil, there are opportunities to retire early if you have the appetite for reasonable risk, and if you get in early enough. I believe these stocks will provide that opportunity.
It is better to invest in the local markets for these stocks because of possible lack of liquidity on the OTC market.
For more promising lithium miners, see my blog posts and other articles.
Disclosure: I am/we are long DMNXF, AVLIF, DJIFF, NRGMF, ILHMF.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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