One month ago on February 18, Prima Diamond Corp. (TSX.V: PMD) announced the proposed acquisition of the Green Energy Project in Utah with historic lithium grades of up to 1,700 mg/L (read Rockstone's report here). Next week shall be the starting shot for rapid advancement of this high-grade lithium brine project amidst skyrocketing lithium demand globally.
With 33 million shares issued and outstanding, the company traded at 1 cent before this proposed acquisition (due to no active project) and is currently trading at 4.5 cents. Also on February 18, the company announced a 5:1 share consolidation for which it called an annual and special meeting of shareholders scheduled for March 21, which is next Monday. The current 33 million shares would reduce to approximately 6.5 million shares while the per-share price increases proportionally.
Since February 18, the company traded 1.5 million shares in Germany and another 8 million shares in Canada mostly between 2 and 5 cents (post-consolidation, this would translate into a share price of 10 and 25 cents, respectively). The ongoing 5 cent post-consolidation financing, which includes a full warrant (exercisable at 7.5 cents in the first year and 10 cents in the second year) and which should be closing next week as well, would translate into a potential 100% to 400% appreciation from current price level of 2 to 5 cents.
Also included in the press-release were a private placement and debt settlement which are components commonly presented when companies are restructured. Rockstone has found that companies at these stages offer great opportunities for significant gains.
The total number of shares after the proposed consolidation, debt settlement, property acquisition and financing would be approximately 39 million issued and outstanding, of which management and insiders will control more than 40% according to a statement from Zimtu Capital Corp. At 5 cents, the company would then be valued at $1.95 million, or $3.9 million at 10 cents, or $9.75 million at 25 cents.
Both the private placement and the property acquisition are subject to final approval by the TSX Venture Exchange.
Rockstone is looking forward to the following week as the shareholder meeting may approve the share consolidation, whereafter a name change is expected to better reflect the company's new focus on lithium brines in the US. Shortly thereafter and with fresh cash in the bank from the proposed financing, the company should be in a good position to use the proceeds for rapid advancement of the Green Energy Lithium Project in Utah.
First steps may include getting down to the property in order to evaluate how to get into the structure and test the brines and flow rates. There exist 5 shut-in wells on the property, which are not abandoned but merely blocked with a piece of concrete.
Re-entering one of those wells shouldn't be overly costly in order to take samples and record well performance data (known to be so-called "flowing artesian wells", i.e. no pumping may be required as the brine flows to surface under the natural pressure of the acquifer).
The company should engage a top engineering firm to do a study on the potential of this structure and the processing of these remarkably high-grade lithium brines.
"Share Consolidation, also known as "Reverse Stock Split", is an exercise undertaken by the company to reduce the total number of shares in issue while simultaneously increasing the nominal or par value of each share. In a Share Consolidation exercise, the number of consolidated shares which existing shareholders are entitled to is in proportion to their existing shareholdings. After this exercise, they will own fewer but proportionately higher priced shares due to the reduction in the number of shares in issue. Thus, Share Consolidation has no effect on the value of the individual shareholder's overall shareholdings relative to the total market valuation of the company." (Definition from ShareInvestor)
Is it Different This Time? Separating Hype from Reality in the Lithium Ion Boom
Recently, Chris Berry published his remarks at PDAC regarding how to interpret the lithium market. The presentation looks at the reasons why the lithium ion battery is increasingly important in our daily lives and offers a few thoughts on what to look for and avoid as you start to understand an increasingly interesting and pivotal space. Click here to view Chris Berry's "picture heavy" presentation
Prima Diamond Corp.
Suite 1450 - 789 West Pender Street
Vancouver, BC, V6C 1H2 Canada
Phone: +1 604 681 1568
Email: email@example.com (Darryl Jones)
Shares Issued & Outstanding: 32,573,500
Canadian Symbol (TSX.V): PMD
Current Price: $0.045 CAD (Mar. 17, 2016)
Market capitalization: $1.5 million CAD
German Symbol / WKN: 2P6 / A117EN
Current Price: €0.027 EUR (Mar. 17, 2016)
Market capitalization: €0.9 million EUR
Research #1: "Prima Diamond Acquires the Green Energy Project in Utah with Historic Lithium Grades of 1700 mg per liter"
Disclaimer: Please read the full disclaimer within the full research report as a PDF (here) as fundamental risks and conflicts of interest exist.
Disclosure: I am/we are long TSX.V:PMD.