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Lightning eMotors Is a Bargain With Exciting Future Prospects

Ready to charge up your electric vehicle stock holdings with a truly unique company? Lightning eMotors (NYSE:ZEV), producer of zero-emission buses, powertrains…

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Ready to charge up your electric vehicle stock holdings with a truly unique company? Lightning eMotors (NYSE:ZEV), producer of zero-emission buses, powertrains and charging products, is a small but ambitious business — but unfortunately, ZEV stock remains under-appreciated on Wall Street.

idex stock: Concept art of an electric vehicle with a charging cord coming out.Source: Shutterstock

One interesting thing about Lightning eMotors is that it has a strategic partnership with Forest River, a Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) company and North America’s largest shuttle bus manufacturer.

Moreover, Lightning eMotors recently announced a strategic partnership with Rev Group (NYSE:REVG) subsidiary Collins Bus to manufacture and deploy zero-emission, all-electric Type A school buses.

Still, informed investors will want to know whether Lightning eMotors is in good fiscal health. We’ll definitely look under the hood and check the financial stats, while also uncovering another value-added partnership — but not within America’s 50 states.

A Closer Look at ZEV Stock

On April 21, shell company GigCapital3’s stockholders approved a special purpose acquisition company (SPAC) merger with Lightning eMotors.

GigCapital3 fulfilled its purpose, and ZEV stock started trading on May 7. The share price was around $8.20 at that time.

The stock went nowhere for a while, but then it suddenly shot up to a close of $11.60 on Aug. 10.

That happened because of the Berkshire Hathaway/Forest River deal. However, it’s also possible that Reddit traders helped to fuel the rally.

Whatever excitement there was in August appears to have faded afterwards. By early October, ZEV stock fell below $8.

Thus, the stock was actually below the pre-SPAC-deal-announcement price. Is this a bad sign, or a prime dip-buying opportunity?

The answer depends on whether you feel that Lightning eMotors has what it takes to compete successfully in the electric vehicle space. This depends on the company’s financials, so let’s delve into that.

Huge Revenue Growth

To start off, we can say with confidence that Lightning eMotors is well-capitalized.

Specifically, the company ended 2021’s second quarter with $201.9 million in cash and cash equivalents on its balance sheet — not too shabby.

Moving on to the top-line results, it’s fair to say that Lightning eMotors is firing on all cylinders.

During the second quarter, the company generated $5.9 million in revenues, marking an incredible 580% year-over-year increase.

However, I won’t pretend that the fiscal picture is perfect with Lightning eMotors. There’s definitely room for improvement, especially when it comes to the company’s bottom-line results.

As it turned out, Lightning eMotors posted a second-quarter net earnings loss of $46.1 million. The company also noted that its quarterly operating expenses totaled $16.8 million.

So, going forward, the investors should look for evidence that Lightning eMotors is taking measures to reduce its capital expenditures.

A Market Across the Pond

We already cited two of Lightning eMotors’ significant collaborations. Now, we can add one more — but it’s not in the U.S.

Just recently, Lightning eMotors signed a strategic partnership with clean-energy-focused engineering and consulting company Ricardo to provide commercial electric vehicles to U.K. customers.

It’s a lucrative opportunity, no doubt. According to the press release, the U.K. represents a market with over 700,000 commercial vehicles in operation today.

The agreement calls for Lightning eMotors to build fully electric powertrains at its 231,000-square-foot Colorado facility.

Those powertrains will be shipped to the U.K. Then, Ricardo will assemble and integrate the powertrains into medium-duty commercial fleet vehicles at one of its U.K.-based manufacturing facilities.

Furthermore, Ricardo will source key components for the electric vehicle assembly from U.K. manufacturers.

Apparently, Lightning eMotors CEO Tim Reeser anticipates a fast-tracked timeline with this collaboration.

“With Ricardo’s automotive expertise and facilities, we will have electric commercial vehicles assembled and running in UK fleets in 2022,” Reeser clarified.

The Bottom Line on ZEV Stock

Early shareholders of ZEV stock enjoyed lightning-fast gains, but they didn’t last long.

Today, there may be a bargain for electric vehicle stock traders. Lightning eMotors shares are down, even while the company is quickly growing its revenues.

The U.K. partnership adds even more interest to Lightning eMotors. If the company can exercise more fiscal discipline, then we could have a real long-term winner here.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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Energy & Critical Metals

Victory Resources Commits to Lithium Exploration While China Continues With Its Lithium Buying Spree

2021.10.14
The mining industry has been headlined by several major deals involving lithium firms over the past week.
This should be of no surprise as the…

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2021.10.14

The mining industry has been headlined by several major deals involving lithium firms over the past week.

This should be of no surprise as the battery metal has been trending up since the beginning of the year. Following a second rally at the onset of the third quarter, lithium prices have shot up to their highest since 2018.

In China, the #1 electric vehicle market globally, lithium carbonate prices have shot up nearly five-fold over the past year and are trading near record highs.

Price of the key battery ingredient held around 165,000 yuan (~$25,000) per tonne in October, not far from the all-time high of 177,000 hit in late September, due to tight supply and stable battery demand.

Year-to-date, lithium prices are up a stunning 160%, based on the price index (including lithium carbonate and hydroxide) tracked by Benchmark Mineral Intelligence (BMI), the world’s leading battery supply chain researcher and price reporting agency.

Source: Benchmark Mineral Intelligence

The rally comes amid a global push for less polluting energy sources, which has automakers and battery manufacturers racing to secure supplies of so-called ‘future-facing commodities’ such as lithium.

China’s Lithium Buy Spree

China in particular has been actively and aggressively pursuing deals to secure battery materials as it looks to establish a dominant position in the global EV supply chain.

The nation’s top battery maker, Contemporary Amperex Technology Co. (CATL), recently outbid Ganfeng Lithium to acquire Canadian miner Millennial Lithium Corp., which holds lithium assets in Argentina.

As China’s largest lithium compounds producer and the world’s biggest lithium company by market value, Ganfeng has gone on an acquisition spree over the years, having invested in several lithium projects in Argentina (Caucharí-Olaroz, Mariana), Australia and China.

In August, Ganfeng proceeded with a takeover of Mexico-focused lithium developer Bacanora, and in the same month, inked a four-year supply deal with Australia’s Core Lithium for 300,000 tonnes of spodumene concentrate, a partly processed form of the battery material.

“We have and will continue to see the Chinese looking to buy lithium,” Matthew Hind, head of global mining at Bank of Nova Scotia’s investment banking division, said in a recent Reuters report, adding that “there will also be small-cap consolidation as well as EV companies buying stakes in mines with strategic partners in order to secure supply.”

It didn’t take long for Hind’s prediction to come true either.

In somewhat of a surprise move, China’s Zijin Mining Group Co., known for its status as a major gold and copper producer, announced last week its first foray into the lithium sector with a $770 million purchase of Neo Lithium Corp., outbidding many other Chinese bidders.

Neo Lithium’s main asset is a high-grade brine operation in Argentina, with CATL already being one of its backers.

“As Zijin is a gold-copper producer and Neo Lithium is still some years from commercial production, this deal exemplifies how hot the market is for independent lithium assets, and how eager the Chinese are,” Chris Berry, president of House Mountain Partners, a Washington-based industry consultancy, told Bloomberg.

In total, Bloomberg Intelligence analyst Christopher Perrella estimates five companies essentially control the $4 billion global lithium market, two of which are Chinese.

Battery Metals Race

The race to secure battery materials is taking place outside of China as well.

Rock Tech Lithium Inc., which is backed by venture capitalist Peter Thiel, plans to locate its first battery metals smelter within a 90-minute drive of Tesla’s gigafactory under construction outside Berlin, in a bet that Germany will take the lead in Europe’s electric vehicle transition.

South Korea’s LG Energy Solution, one of the biggest EV battery makers globally, recently agreed to buy as much as 100,000 tonnes of lithium a year as part of a six-year “take-or-pay” deal with Vancouver-based Sigma Lithium Corp., which controls a hard rock lithium deposit in Brazil.

In Australia, the world’s biggest lithium exporter, Prime Minister Scott Morrison plans to establish a A$2 billion ($1.5 billion) loan facility for the development of critical minerals projects, with the mining powerhouse aiming to win a bigger market share for materials used in electric cars.

In short, demand for lithium is accelerating around the world, with sales of electric vehicles growing at a faster pace than previously thought.

Source: Reuters

According to SQM, one of the top producers of the battery ingredient, EV demand surged more than 150% in the first half of 2021 from a year ago. As a result, the Santiago-based firm estimates that global lithium demand could increase more than 40% this year, translating into a sales volume of more than 95,000 tonnes, up by 10,000 tonnes from its previous forecast.

Data from battery consultancy Rho Motion shows global EV sales were up 150% in the seven months to July to over 3 million units compared to the same period in 2020, with about 1.3 million sold in China alone. For 2021, Rho Motion expects sales to reach as high as 5.8 million.

Longer-term, BloombergNEF estimates that the green energy transition will result in a five-fold increase in global lithium consumption by the end of this decade.

Source: BloombergNEF

In light of a global race for battery minerals, a recent World Economic Forum report forecasts that the global market for lithium-ion batteries will reach $300 billion annually by 2030.

Supply Crisis

The EV boom has naturally depleted stocks of battery materials such as lithium, causing the supply to tighten in major markets.

In China, lithium carbonate output in August rose 19% year-on-year to almost 20,000 tonnes, according to state-backed research house Antaike, but this output would be easily outstripped by demand from the EV sector.

BMI estimates that demand for lithium is expected to jump 26.1%, or about 100,000 tonnes LCE, to a total of 450,000 tonnes this year, more than enough to flip the entire market into a deficit.

Prices are already climbing across the supply chain. Pilbara Minerals Ltd.’s second auction of spodumene concentrate attracted a top bid of $2,240/tonne for a cargo of 8,000 tonnes, up from $1,250 in its inaugural tender in July.

China’s lithium carbonate has almost doubled in just two months, and lithium hydroxide is up more than 70% in the period, according to Asian Metal Inc. data.

Exacerbating the lithium supply crunch are the high production costs arising from the global energy crisis.

Ganfeng has already told customers that it is raising prices for lithium metal products by 100,000 yuan ($15,500) per tonne for the next month, partly because of China’s power supply shortages.

However, even before the reduced industrial output, BMI analyst George Miller had previously forecast an LCE deficit of 25,000 tonnes this year, with acute deficits expected in 2022 and beyond.

Given China represents more than 60% of the world’s processing capacity, the actual supply deficit is likely to exceed estimates by the end of this year.

“Unless we see significant and imminent investment into large, commercially viable lithium deposits, these shortages will extend out to the end of the decade,” Miller added.

A lengthy slump since 2018’s peak meant investment in the sector slowed, and the pandemic has since exacerbated global supply constraints.

“The financing for lithium projects is still too little, too late,” Cameron Perks, a Melbourne-based analyst at BMI, said in a Bloomberg report. “The market deficit is already occurring.”

Source: BMI

“As prices increase now, there will be unknown yet-to-be-announced projects and expansions that will help to increase supply to meet demand. That is almost a certainty. What is not certain is just how many unknown projects there are out there,” Perks added.

“There’s also a possibility that not enough lithium can be mined, then it could risk a slower EV roll-out.”

All signs are pointing towards a sustained market shortage for the battery metal in the coming years. China, seeking to maintain a dominant position in the EV industry, has perhaps triggered a flurry of deals and new investments in the lithium sector, which could soon be followed by many others.

Smokey Lithium

Sooner or later, the big players in the EV battery space (i.e. China) will turn to projects outside South America’s Lithium Triangle, as political factors are most likely to influence mining decisions in these countries in the future.

One place we’ve previously discussed in detail is the Clayton Valley of Nevada, whose lithium deposits contain favorable characteristics such as arid climate, closed basin containing a playa or salar, tectonically driven subsidence, associated igneous or geothermal activity, and suitable lithium source rocks.

The Clayton Valley is also where Albemarle’s Silver Peak mine, the only lithium-producing site in North America, is found.

Leveraging Nevada’s favorable geology and rich mining history, several companies have begun exploring its claystones and brines over recent years, with the goal of developing the next lithium source for the EV battery supply chain.

Among those lithium explorers in Nevada, we are particularly intrigued by Victory Resources Corporation (CSE: VR) (FWB: VR61) (OTC: VRCFF), which is anticipating further advancement on its Smokey lithium project in the near term to benefit from the EV revolution.

Victory’s Smokey lithium project is located about 35 km west of Tonopah, Nevada, within the famous Big Smokey Valley that traverses three counties across the state.

Esmeralda County — where the project is situated — is one of the world’s most prolific regions for lithium clay deposits (Noram, Cypress, American Lithium, Spearmint, Enertopia, Jindalee). These deposits all have proven large tonnages with acceptable lithium grades in excess of 900 ppm.

The Smokey lithium property lies approximately 35 km north of Clayton Valley, adjacent to and possibly on trend with the Clayton North project (930 ppm Li) held by Australia’s Jindalee Resources Ltd.

Farther away, Noram’s Zeus lithium project (900 ppm Li) is about 25 km to the southeast, while 35 km to the northeast is American Lithium’s flagship Tonopah Lithium Claims property (1,000 ppm Li).

Smokey clay lithium project and other properties in the region

In this prolific lithium region hosting, Victory’s Smokey project covers a total of 350 claims covering 7,000 acres of land with excellent access and relatively flat ground.

The property shares similar geologic settings to the Clayton Valley and the many exploration projects nearby. It is located in the Walker Lane trans tensional corridor on the western margin of the Basin and Range province.

The property’s geology consists of Miocene – Pliocene tuff deposits, claystones and siliciclastic beds (Esmeralda Formation) with overlying younger alluvium deposits and desert pavement formation. The claystone, which can carry high lithium concentrations, is observed as highly weathered light grey to tan mounds of unconsolidated clay from 0.10-1.50m thick.

The flat-lying nature of the claystones, together with the frequent occurrence of transported cover, requires drilling to fully validate and assess the Smokey project’s lithium potential.

Based on strong results from this summer’s geological sampling, which indicated several areas of high lithium values (up to 1,500 ppm Li), Victory is now fast-racking a drill permit application for the Smokey lithium property.

Conclusion

Victory’s progress at its Smokey project comes just as when lithium is in the midst of another record-setting rally.

The BMI lithium index has already shot up by 160% year to date, with prices averaging $10,800 during the first half of 2021 versus over $17,000 in 2018.

Strong demand for lithium-ion batteries for EVs and other applications is expected to put a strain on the global supply of battery raw materials, which will likely invoke a string of new investments.

China’s biggest battery makers and miners are already gobbling up lithium assets left, center and right, with more deals still left to be done. Lithium has gotten so hot in China that even the gold miners now want to join in on the act.

With the global race to secure minerals in full throttle, there will be calls made to companies holding lithium projects within the most prolific regions of the world.

In the Clayton Valley of Nevada, best known for its affluence of lithium clay deposits, Victory Resources, with a strategic focus on serving the EV sector, is gearing up for drilling at its highly prospective Smokey lithium property, and just one discovery hole from that could be a game-changer for the company.

Seeing many others have previously found success in this area, we expect Victory to deliver more exciting news later this year.

Victory Resources Corp.
CSE:VR | FWB: VR61 | OTC:VRCFF
Cdn$0.055, 2021.10.12
Shares Outstanding 89.9m
Market cap Cdn$5.4m
VR website

Richard (Rick) Mills
aheadoftheherd.com
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Energy & Critical Metals

Uranium Miners Confident They Are ‘On the Cusp of a New Renaissance’

Australia’s next uranium producer says the industry is “on the cusp of a new Renaissance” as nuclear utilities begin to … Read More
The post Uranium…

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Australia’s next uranium producer says the industry is “on the cusp of a new Renaissance” as nuclear utilities begin to engage with miners on the back of price spikes in the spot market.

Uranium miners have suffered from almost a decade of low spot prices that has seen investment leach from the sector.

Owners of nuclear reactors have been able to rely on low-priced material in the spot market to supplement their long-term contracts.

That option is quickly closing up as feverish uranium buying from the North American-listed Sprott Physical Uranium Trust, hedge funds and mining companies has put a rocket under uranium prices.

Dawdling in the low US$30s for each pound of yellowcake for most of the year, the price shot up to more than US$50/lb in quick time before hitting choppy waters a couple weeks ago.

After sliding below US$40/lb it was back up to US$46.50/lb yesterday, including a $7 price rise in a single night.

The reaction of investors to uranium equities has been wild.

Boss Energy (ASX:BOE) managing director Duncan Craib, whose company owns the development ready Honeymoon mine in South Australia, believes utilities are just about ready to get the market back to sign the long-term contracts needed to restart mothballed operations like Boss’.

Speaking at the Resources Rising Stars Boom in a Room Conference in Perth yesterday, Craib said that renaissance is ready to start.

 

Decarbonisation bringing investors and public sentiment back to nuclear

Nuclear power has been a long-term pariah because of a series of high profile incidents.

The latest is the Fukushima disaster in 2011, but attitudes towards nuclear power have been coloured for decades by the reaction to tragedies like the Three Mile Island and Chernobyl meltdowns.

Although it services up to 20% of global electricity demand, nuclear power is still under a moratorium in Australia.

In some quarters though, attitudes are thawing from policymakers who see nuclear power, which unlike burning coal, gas or diesel for power does not emit greenhouse gases, as a baseload power option to support the shift to renewable energy.

While nuclear energy has been held back by the capital intensity of new builds, Craib says a shift to smaller, cheaper modular reactors will help the sector grow, making uranium a sought-after green fuel.

“So that global increased recognition of (the role) nuclear power can play in decarbonising and mitigating climate change through reducing our carbon emissions, while addressing the energy crisis, is what’s really driving the price of the uranium that we see,” he said.

“And that gap between demand and supply that has always existed is further exacerbated by the fact that the Sprott Commodity Trust is now acquiring a lot of available inventory and removing that from the market.”

 

Perceptions changing

Craib believes perceptions around nuclear power and uranium mining have shifted significantly in the past six months, amid growing concerns about how the world will reach ambitious net zero by 2050 targets and soaring energy prices in the northern hemisphere.

But he said the fundamentals that have underpinned the market’s recent optimism have been brewing for several years.

“There’s a real transformational shift for the past six months … but the key element here is that the fundamentals existed long before this change in global perception towards the mitigating of climate change,” he said.

“It existed long before COVID. The fundamentals were simply industry was in the doldrums.

“This meant a lack of investment in new mines, there’s been no exploration taking place. The utilities have been reliant on existing inventory.

“The big change that’s occurred (with the) sharp increase in the spot price has been the emergence such as ourselves, junior producers acquiring physical inventory, we’re seeing the price rise, similarly as we can see with the Sprott Commodity Trust.”

“And since February, we’ve seen significant increase in investment into uranium equities of some $2 billion, which is really changing the market.”

It is generally accepted that new supply will be needed from 2024 to keep the world’s nuclear fleet running.

Utilities which have been drawing down on spot inventories and are now heading back to the table with current and prospective producers as security of supply becomes a concern.

“(The spot price is) forcing nuclear power plants to change their method and go back to long term contracting, which is where restart projects such as Honeymoon come into play,” Craib said.

“The only way that the industry is going to get off its knees, as it has been for the last 5-10 years, is to encourage higher prices.

“A new incentive price of up to US$60/lb is required to bring new projects back online.”

 

Boss Resources share price today:

 

 

 

 

Conditions for a restart nearing

Spot markets are relatively small and can be particularly volatile, but they provide an important index for long-term contracts, which are generally signed at a 20% premium to spot prices and give consumers and producers confidence that both utilities and mines can be sustainable.

A June feasibility study showed Honeymoon, a restart of an old uranium mine with approvals and an export permit for 3.3Mlb of uranium a year already in place, could be in production within 12 months of an investment decision at a cost of just US$80 million.

Because of that Craib says Honeymoon is a “proven project” with a clear pathway to production.

Honeymoon would be cash flow positive at current spot prices, but Craib says Boss is waiting for the evidence of a sustainable market that will underpin long term contracts.

“For us, we’re only looking to contract about 40% of our mine life,” Craib said.

“At these prices, we can do that and keep a lot of the spot material to get exposure to the upside.

“We’re on the cusp of this new Renaissance period.”

The post Uranium miners believe they’re ‘on the cusp of a new Renaissance’ appeared first on Stockhead.

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Economics

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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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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