5 things you need to know before buying a red hot lithium junior
Bubbles have formed for as long as stocks have been publicly traded. For speculators looking to jump into the lithium space now, here’s a few small tips that could prevent some big losses.
1. Beware of the Johnny Come Lately(s): When a stock market bubble starts to enter the mania phase, which we think could be happening now with lithium, companies with either no experience in the space or have plans to change their name/focus to lithium from another metal/mineral (or a completely unrelated business) begin to pile into the sector.
More recently, companies such as Great Thunder Gold Corp. (CVE:GTG) and Benton Capital Corp. (CVE:BTC) have announced plans to explorer for lithium and/or develop a lithium project. Juniors such as these could achieve success someday, but carry a lot risk at present.
2. Look for Advanced or Well-Regarded Projects: For example, Nemaska Lithium Inc. (CVE:NMX) contends that its Whabouchi deposit in Quebec is the second richest and largest deposit in the world with 27.3 MT Proven and Probable Reserves at an average grade of 1.53% Li2O. It is also permitted and has the support of the Quebec government. Nemaska recently released results of an updated Feasibility Study, and raised $13 million, most of which will be used to finance Phase 1 of its Lithium Hydroxide Plant.
3. Past Success Could Mean Future Profits: Lithium X Energy Corp. (CVE:LIX) has the backing of mining heavyweights Paul Matysek and Frank Giustra. It has the largest land package in Clayton Valley, Nevada (more than 15,040 acres), and owns 50%, with an option to acquire up to 80%, of the Sal de los Angeles lithium brine project in Argentina.
4. Know Your Deposits: There are two different ways of extracting lithium. Brine is pumped from subsurface reservoirs to surface ponds. The power of the sun evaporates excess water and concentrates the mineral content of the brine. Hard rock is mining in the more traditional sense, where spodumene is mined and crushed to form a concentrate. This mineral concentrate is then sold to chemical companies that use the feedstock to produce lithium chemicals or to glass and ceramics producers, which use it as an additive (Source: indmin.com). Brine extraction, not surprisingly, is much less expensive.
5. Find a Junior with a Competitive Advantage: Mercenary Geologist Mickey Fulp mentioned at PDAC 2016 that he likes Nevada Sunrise Gold Corporation (CVE:NEV), which he says owns all the water rights in Nevada’s Clayton Valley not currently controlled by Albemarle Corp.’s (NYSE:ALB) and its Silver Peak lithium mine. He contends that all of the lithium juniors with properties in the Clayton Valley have a problem because they don’t own any water rights, and when mining brine you have to have water. Watch the entire interview with Mercenary Geologist Mickey Fulp here >>