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Is Cypress Development Corp. the Cheapest Lithium Junior on the Planet?

Source: Peter Epstein for Streetwise Reports   10/13/2021

Peter Epstein of Epstein Research notes that five major lithium transactions have…

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This article was originally published by Streetwise Reports

Source: Peter Epstein for Streetwise Reports   10/13/2021

Peter Epstein of Epstein Research notes that five major lithium transactions have occurred in the past six months: Galaxy, Millennial, Neo Lithium and Bacanora Lithium were acquired (or are in the process), and ioneer ltd. sold half its project for US$490 million. Cypress Development is one of the few remaining companies with a 100%-owned project at PFS or BFS stage.

When announcements were made in April and May that Galaxy Resources and Bacanora Lithium were to be acquired by Orocobre and China’s Ganfeng Lithium, respectively, I wasn’t surprised. Lithium (Li) prices were on the move and electric vehicle (EV) sales were soaring. Two months later, Ganfeng announced a proposed acquisition of Millennial Lithium, only to be outbid by Chinese battery maker CATL.

On September 15, Australia-listed ioneer ltd. announced the sale of 50% of its flagship Li-boron project to Sibanye Stillwater for $490 million. Last Friday, Neo Lithium agreed to be acquired by China’s Zijin Mining. The last two transactions are notable because the buyer has no meaningful experience in lithium. Sibanye is a PGM/gold producer and Zijin a gold-copper conglomerate. 

That makes five major transactions in six months. Of those five, just two acquirers are lithium companies. This demonstrates my long-held view that multiple types of companies and investment funds could be interested in lithium assets.   

Automakers should be interested in direct Li investments. In fact, analysts are perplexed as to why major OEMs have not secured major stakes in Li assets. I’m tracking 38 automakers, 30 have enterprise values >$10 billion, 10 are >$100 billion (Tesla’s enterprise value is nearly $800 billion).

Diversified miners like Teck, BHP and Vale could care, Rio Tinto already has a large Li project in Serbia. ExxonMobil and Chevron have been diversifying into solar. Royal Dutch Shell and Suncor have added wind projects to the mix. I would not be surprised to see oil/gas companies investing in Li projects this decade.


Giant commodity traders like Glencore, Mitsui anf Trafigura are getting more into battery metals. Finally, private equity, hedge and sovereign wealth funds (SWF) should care about hard asset commodity companies, especially as inflation fears mount.

There are trillions of dollars invested in SWFs alone. Unsurprisingly, three of the largest SWFs on the planet, from Norway, Kuwait and Abu Dhabi, have large allocations to oil/gas assets.

As companies and funds turn to battery metals, how many Li companies are there to choose from? I’m tracking ~110 names with market caps of at least C$10 million. Some have advanced projects, but already have strategic partners. Orocobre owns 66.5% of its project in partnership with Toyota Tsusho.

Standard Lithium is closely tied to Germany’s Lanxass, a specialty chemicals company. Czech group ČEZ owns 51% of European Metals project. AVZ Minerals owns 51% of its large African project after selling 24% of it to Suzhou CATH Energy Technologies for $240 million.

How many publicly traded, pre-revenue companies host (20,000+ LCE/year), 100%-owned projects that are (at least) at prefeasibility study (PFS) stage? I come up with seven, one of which is my long-time favorite Cypress Development Corp. (CYP:TSX.V; CYDVF:OTCQB; C1Z1:FSE). There are plenty of privately owned Li projects, but most of them are presumably tied up. So, I believe there are only about 10 Li companies that have sizable, 100%-owed projects, at PFS/bankable feasibility study (BFS) stage.

Cypress has delivered a PFS, and is starting up a pilot plant. It owns 100% of a sedimentary, clay-hosted Li project in Nevada and maintains control over 100% of its prospective Li hydroxide off-take. A BFS is expected in about six months.


Of the 10 names I referred to above, some have off-take agreements in place, and/or are closely aligned with much larger players. DLE hopeful Vulcan Energy Resources has two off-take deals signed. Piedmont Lithium has an off-take with Tesla.

In addition to its 100%-owned Thacker Pass clay-hosted Li project, Lithium Americas has a 49/51 joint venture with Ganfeng, and Ganfeng also owns 12.5% of the company’s shares. Cypress hosts one of a handful of PFS/BFS stage projects that’s 100% owned, 100% open for off-take discussions and does not have a significant strategic shareholder looming over it.

Not only is M&A heating up, Li prices have been rising for over a year. The China spot price has more than quadrupled from August 2020 lows. The chart below is in Chinese yuan, 178,000 yuan = US$27,625/tonne. Since last summer, Li is one of the best performing commodities on the planet.

On October 13th, a press release describing the start of a robust pilot plant was put out. In it, CEO Bill Willoughby comments,

“The completion of the pilot plant represents a significant milestone, marking the culmination of months of work by Cypress, our consultants, and contractors. This work, under the direction of CMS and supported by the management and personnel of del Sol Refining, has resulted in a plant that embodies the research that went into our process flowsheet. The testing will be one of the larger piloting efforts to extract lithium from clay in the world, and the only one based on a chloride approach to leaching.

While the ultimate goal is to demonstrate the production of lithium hydroxide from our clay-stone resource on a larger scale, the results from the various areas within the plant, from leaching & tailings handling, to solution treatment & recycling, chemical usage and water balance, will provide the data necessary to carry the project forward to the feasibility level.”


Cypress is within about six months of both meaningful pilot plant results that can be communicated to potential strategic partners and prospective customers, AND a BFS that will help attract project funding. The de-risking over the past few years has been spectacular. A strong BFS will open the door to dozens of suitors.

With all of this good news, management is trying harder to tell its story. Two months ago, Spiro Cacos was hired as VP Investor Relations. He has signed CEO Willoughby up for at least four investment conferences through December 9. Spiro and Bill have also had over a few dozen conference calls with sell-side analysts and institutional investors.

Further ramping up marketing efforts now is very important, especially as Millennial Lithium and Neo Lithium shareholders get cashed out and are looking for places to park that cash.

I’ve been writing about Cypress Development Corp. for nearly four years. The more I learn, the more I consider the company’s process flow sheet to be relatively low risk compared to some Direct Lithium Extraction (“DLE”) technologies on the drawing board.

With strong Li prices for years to come and increased M&A, it seems very likely (to me) that Cypress will find a strategic partner and enter commercial production in 2025 or 2026. Once the market realizes that a new Li hydroxide producer in Nevada is on the horizon, the dramatic valuation discount to peers should start to close.

In the chart below, notice that Cypress Development’s clay-hosted project is valued at 9% of its PFS-derived, after-tax NPV(8%). By contrast, eight peers (four of which that are in the process of being acquired) have projects valued at an average of 45% of after-tax NPV(8%). Cypress is trading at an 82% discount to peers.

If peers increase in value by an avg. of 50% over the next 12 months, and Cypress were to triple in value… It would still be trading at a 61% discount. I truly believe there’s room for Cypress to run here.

Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis. He holds an MBA degree in financial analysis from New York University’s Stern School of Business.

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Disclosures/disclaimers: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Cypress Development Corp., including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Cypress Development Corp. are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this article was posted, Peter Epstein owned shares in Cypress Development Corp.

Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.

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( Companies Mentioned: CYP:TSX.V; CYDVF:OTCQB; C1Z1:FSE,

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US markets scale fresh highs on upbeat earnings, housing data

S P 500 and Dow Jones closed at record highs for the second consecutive day on Tuesday October 26 while Nasdaq rallied as quarterly results kept the…

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S&P 500 and Dow Jones closed at record highs for the second consecutive day on Tuesday, October 26, while Nasdaq rallied as quarterly results kept the markets in high spirits.

The S&P was up 0.18% to 4,574.79. The Dow Jones Industrial Average rose 0.04% to 35,756.88. The NASDAQ Composite Index gained 0.06% to 15,235.71, and the small-cap Russell 2000 was down 0.72% to 2,296.08.

Traders were further encouraged by the Commerce Department’s positive economic data, which showed new home sales jumped 14% to 800,000 units in September, the highest level since March. However, higher home prices still remained a major worry.

Energy and utility stocks led gains on the S&P 500 index, while industrials and communication services stocks were the bottom movers. Nine of the 11 sectors of the index stayed in the positive territory.

General Electric Company (GE) stock rose 2.19% in intraday trading after reporting its third-quarter earnings. Its adjusted profits were 57 cents per share, above the analysts’ estimates of 43 cents a share. However, its revenue fell by 1% YoY to US$18.4 billion in the quarter.

Shares of United Parcel Service, Inc. (UPS) were up 7.38% after reporting better-than-expected results. Its revenue increased by 9.2% YoY to US$23.2 billion in Q3, FY21.

Lockheed Martin Corporation (LMT) stock tumbled 12.48% after it trimmed its revenue forecast. Its net sales fell to US$16.02 billion in Q3 from US$16.49 billion in the year-ago quarter. In addition, it lowered its revenue forecast for FY2021 due to supply woes.

In the energy sector, Exxon Mobil Corporation (XOM) surged 2.30%, EOG Resources, Inc. (EOG) rose 1.39%, and Occidental Petroleum Corporation (OXY) gained 1.28%. Devon Energy Corporation (DVN) and Baker Hughes Company (BKR) rose 2.37% and 2.88%, respectively.

In utility stocks, NextEra Energy, Inc. (NEE) increased by 1.57%, Southern Company (SO) jumped 1.03%, and Exelon Corporation (EXC) rose 1.10%. DBA Sempra (SRE) and AES Corporation (AES) advanced 1.24% and 1.59%, respectively.

In the communication sector, Alphabet Inc. (GOOGL) rose 1.33%, Facebook, Inc. (FB) fell 4.52%, and Twitter Inc. (TWTR) declined 1.27%. Match Group, Inc. (MTCH) and News Corporation (NWS) plummeted 2.51% and1.17%, respectively.

Also Read: General Electric Co (GE) revises guidance upward after Q3 profits

Also Read: Raytheon (RTX) raises sales guidance, 3M (MMM) narrows EPS outlook

Nine of the 11 sectors of the S&P 500 index stayed in the positive territory.

Also Read: Eli Lilly (LLY), Novartis (NVS) profits up on robust sales growth

Futures & Commodities

Gold futures were down 0.70% to US$1,794.10 per ounce. Silver decreased by 1.55% to US$24.212 per ounce, while copper fell 0.71% to US$4.4958.

Brent oil futures traded flat at US$85.44 per barrel and WTI crude was up 0.85% to US$84.47.

Bond Market

The 30-year Treasury bond yields were down 2.06% to 2.042, while the 10-year bond yields fell 1.55% to 1.610.

US Dollar Futures Index increased by 0.15% to US$93.953.

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Failure To Bury “Transitory” Inflation Narrative Risks Sparking Biggest Fed Error In Decades: El-Erian Warns

Failure To Bury "Transitory" Inflation Narrative Risks Sparking Biggest Fed Error In Decades: El-Erian Warns

Authored by Tom Ozimek via The…

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Failure To Bury “Transitory” Inflation Narrative Risks Sparking Biggest Fed Error In Decades: El-Erian Warns

Authored by Tom Ozimek via The Epoch Times,

Failure on the part of the Fed to toss its stubbornly-held “transitory” inflation narrative and act more decisively to rein in persistently high price pressures raises the likelihood the central bank will need to slam on the brakes of easy money policies much more forcefully down the road, risking avoidably severe disruption to domestic and global markets, according to Queen’s College President and economist Mohamed El-Erian.

In stark contrast with the mindset of corporate leaders who are dealing daily with the reality of higher and persistent inflationary pressures, the transitory concept has managed to retain an almost mystical hold on the thinking of many policy makers,” El-Erian wrote in an Oct. 25 op-ed in Bloomberg.

“The longer this persists, the greater the risk of a historic policy error whose negative implications could last for years and extend well beyond the U.S.,” he argued.

Consumer price inflation is running at around a 30-year high and well beyond the Fed’s 2 percent target, to the consternation of central bank policymakers who face increasing pressure to roll back stimulus, even as they express concern that the labor market hasn’t fully rebounded from pandemic lows.

The total number of unemployed persons in the United States now stands at 7.7 million, and while that’s considerably lower than the pandemic-era high, it remains elevated compared to the 5.7 million just prior to the outbreak. The unemployment rate, at 4.8 percent, also remains above pre-pandemic levels.

At the same time, other labor market indicators, such as the near record-high number of job openings and an all-time-high quits rate—which reflects worker confidence in being able to find a better job—suggest the labor market is catching up fast. Businesses continue to report hiring difficulties and have been boosting wages to attract and retain workers. Over the past six months, wages have averaged a gain of 0.5 percent per month, around twice the pace prior to the pandemic, the most recent jobs report showed.

Besides measures of inflation running hot, consumer expectations for future levels of inflation have hit record highs, threatening a de-anchoring of expectations and raising the specter of the kind of wage-price spiral that bedeviled the economy in the 1970s. A recent Federal Reserve Bank of New York monthly Survey of Consumer Expectations showed that U.S. households anticipate inflation to be 5.3 percent next year and 4.2 percent in the next three years, the highest readings in the history of the series, which dates back to 2013.

El-Erian, in the op-ed, argued that the Fed has “fallen hostage” to the framing that the current bout of inflation is temporary and will abate once pandemic-related supply chain dislocations will abate.

“It is a framing that is pleasing to the ears, not only to those of policy makers but also those of the financial markets, but becoming harder to change,” he wrote.

“Indeed, the almost dogmatic adherence to a strict transitory line has given way in some places to notions of ‘extended transitory,’ ‘persistently transitory,’ and ‘rolling transitory’—compromise formulations that, unfortunately, lack analytical rigor given that the whole point of a transitory process is that it doesn’t last long enough to change behaviors,” he wrote.

El-Erian said he fears that Fed officials will double down on the transitory narrative rather than cast it aside, raising the probability of the central bank “having to slam on the monetary policy brakes down the road—the ‘handbrake turn.’”

“A delayed and partial response initially, followed by big catch-up tightening—would constitute the biggest monetary policy mistake in more than 40 years,” El-Erian argued, adding that it would “unnecessarily undermine America’s economic and financial well-being” while also sending “avoidable waves of instability throughout the global economy.”

His warning comes as the Federal Open Market Committee (FOMC)—the Fed’s policy-setting body—will hold its next two-day meeting on November 2 and 3.

The FOMC has signaled it would raise interest rates sometime in 2023 and begin tapering the Fed’s $120-billion-a-month pandemic-era stimulus and relief efforts as early as November.

Some Fed officials have said that, if inflation stays high, this supports the case for an earlier rate hike. Fed Governor Christopher Waller recently suggested that the central bank might need to introduce “a more aggressive policy response” than just tapering “if monthly prints of inflation continue to run high through the remainder of this year.”

“If inflation were to continue at 5 [percent] into 2022, you’ll start seeing everybody potentially – well, I can’t speak for anybody else, just myself, but – you would see people pulling their ‘dots’ forward and having potentially more than one hike in 2022,” he said in prepared remarks to Stanford Institute for Economic Policy Research.

The Fed’s dot plot (pdf), which shows policymakers’ rate-hike forecasts, indicates half of the FOMC’s members anticipate a rate increase by the end of 2022 and the other half predict the beginning of rate increases by the end of 2023.

For now the market is pricing in a more hawkish Fed response in 2022

Tyler Durden
Tue, 10/26/2021 – 16:49

Author: Tyler Durden

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Kimberly-Clark Forecasts Price Increases as Inflationary Pressures Accelerate, Supply Chain Disruptions Worsen

In yet another sign that inflation pressures are proving to be a lot more than just transitory, Kimberly-Clark (NYSE: KMB)
The post Kimberly-Clark Forecasts…

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In yet another sign that inflation pressures are proving to be a lot more than just transitory, Kimberly-Clark (NYSE: KMB) — the maker of staple household goods such as Kleenex tissues, Huggies diapers, tampons, and toilet paper— has sounded the alarm over impacts of rapidly accelerating prices and supply chain headaches.

Shares of Kimberly-Clark tanked to a six-month low after the company cut its annual forecast due to rising inflation and supply chain disruptions. Third quarter net income stood at around $469 million, which equates to approximately $1.39 per share, against the $472 million— or $1.38 per share reported during the same period one year ago. The company reported an adjusted earnings per share of $1.62, which failed to meet consensus estimates calling for $1.65.

“Our earnings were negatively impacted by significant inflation and supply-chain disruptions that increased our costs beyond what we anticipated,” said Kimberly-Clark CEO Mike Hsu. As a result, Hsu warned that the company will be implementing price increases across a variety of goods in an effort to offset implications of supply chain woes and subsequent acceleration in commodity costs. “We are taking further action, including additional pricing and enhanced cost management, to mitigate these headwinds as it is becoming clear they are not likely to be resolved quickly,” he added.

However, Kimberly-Clark is far from being the only households goods company to sound the alarm over the effects of global supply chain disruptions and a persistent inflationary macroeconomic environment. Recall, General Mills, P&G, among others, have all issued warnings about impending cost-push inflation, as companies contend with margin compression that is further exasperated by ongoing labour shortages.

Information for this briefing was found via Kimberly-Clark. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post Kimberly-Clark Forecasts Price Increases as Inflationary Pressures Accelerate, Supply Chain Disruptions Worsen appeared first on the deep dive.

Author: Hermina Paull

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