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Why does Talison Lithium seem invisible in the marketplace?

May 13, 2011 11:48 AM ETTLTHF2 Comments
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I’ve been following Talison Lithium (TSX:TLH, TLTHF.PK) for months now and been a shareholder since October 2010 when I bought my first shares at $5.27.  I been reviewing their recent news release for Q3 and am very satisfied with the solid numbers that were released (see link below).  They reported sales of $29.2 million for Q3, an increase of 78% since last year.  Their new earnings of $6.3 million, represented a 123% increase for a net profit of $3.9 million year over year.  
Seems like you can’t ask for anything more from the company who has 300+ customers and seems to be selling everything that they’re producing to customers in Asia.  They sell most of their product like to China and actually have become the largest lithium supplier in the world, after recently overtaking SQM and supplying approximately 33% of global demand.  Problem is, after seeing the stock go as high as $7.80 near the end of 2010, the stock price has become stagnant lately and is underperforming at under $5 per share lately.  What’s going on with the stock price and why is it underachieving?

As much as I like the company as a long term investment, times like these you have to remember that these are quite unusual times and the volatility still exists in markets.  The company is also less than a year old since the company has been listed on the Toronto Stock Exchange.  It was listed back in late September when the company released an initial public offering at $3.30.  Although there are other Lithium companies such as Lithium exploration group (OTC: LEXG.OB), or even the rare earth giant Molycorp (NYSE: MCP) that have risen much higher in share price over the last 6 months, let’s remember that Talison already has more established revenue, profits, production, and expansion plans already underway.  In fact, they recently announced that they’re expanding production levels equal to 740 000 tonnes per annum of Lithium Concentrate (Spodumene) and about 110 000 tonnes per annum of lithium carbonate equivalent.  As CEO Peter Oliver stated in March, “The expansion is in-line with Talison’s strategy to leverage off the strengths of its large, high-grade lithium deposit at the Greenbrushes Lithium Operations and its technical expertise in the production of lithium concentrate.  Talison’s production capacity will be broadly equivalent to the size of the total market in 2010″.  Even with all the successful company achievements and reporting, does the market even recognize Talison’s rapid progress or their potential of becoming the next great blue chip company to dominate their industry?

As I thought further about why the share price does not move up, I realized and saw that Talison is actually doing everything it has possibly can for shareholders as a business, except for marketing themselves at a higher level to investors on main street, wall street, and bay street.  The company just needs to really communicate its success story and promote themselves as the next up and coming company to dominate its industry and for the world to invest in.  As I researched further,  I realized it would probably be of more benefit if the company were to increase their listings on more major exchanges to obtain greater trading volume and investor interest.  At this time they’re only listed on the Toronto Stock Exchange, but you’d have to think the company needs to take it one step at a time and execute an effective marketing plan accordingly when the opportunity presents itself in the coming months and years.  Until then, shareholders may need to be more patient with this undervalued stock.  After all, how many of us on main street even understand what Lithium is? Why’s it now strategically important?  or what are its daily uses or industry applications?

For now, my strategy for this stock is taking a page out of James Dines’ book, by investing early-often-and ahead of the herd.

Disclosure:  Long TLH.TO, TLTHF.PK

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