The world agrees—lithium is the only commodity that will go up in price in 2016.
Lithium is fueling the global consumer electronics market (grams per unit), the fast growing Electric Vehicle (1-5 kg per unit for hybrids, up to 44 kg for fully electric cars) market and will get a huge boost as energy storage (10-20 kg/unit) comes to homes and industry.
I liken the coming lithium boom to the uranium boom of 2006-2009—when I paid off my house and went to Europe for 3 weeks—all from the profits of investing in junior uranium stocks.
The secret to these lucrative gains was looking first at management and structure.
That’s why I think Lithium-X (LIX-TSXv) is the stock to own for the Big Leverage to the lithium space.
When I see the track record of Chairman Paul Matysek and financier Frank Giustra packed inside a $16 million market cap (40 million shares)—in the first inning of the next bubble in junior energy stocks—I think investors’ odds of making Big Money is very, very good.
Both men have built and sold multiple juniors, creating huge wealth for shareholders. Matysek has even done it once before in lithium, taking a junior called Lithium One from 10 cents and merging it with Australian company called Galaxy Resources for $1.55—a 15 bagger, or 1500%, in 2 ½ years. He had to do over 50 deals to make that merger happen in 2012.
That means out of the gate I have a management team who already knows everyone in this new and now fast growing industry.
Prior to that, Matysek made his shareholders millions—doing the exact same thing with a company called Potash One. He staked some ground near an existing potash mine in Saskatchewan. They drilled out a resource, but more importantly Matysek and his team were able to secure permitting and water rights.
Again, in just 2 ½ years Matysek was able to build and sell the asset—this time for $4.50 a share, and all cash, in November 2010. That potash deposit is now going into production.
Prior to that, he gave shareholders a massive win in uranium—another energy metal. And that’s what Matysek’s company was called—Energy Metals.
I’ll let Paul tell his own story:
“In terms of the uranium market, it all started because I got the US Energy policies and the value of uranium is almost like 25% of the national electrical output for power.
“There was a plan in 2004 to build nuclear reactors and the price of uranium was $10 and you could see there would be a squeeze on it. Over the course of 3 years the price of uranium went from $10 to $110 and so I had the winds of a commodity price increase at my back.
“In the space of one year I did three acquisitions …it was a race to try and get the “pounds in the ground” assets as soon as possible. Then after Year 2 we were trying to get them into production.
The type of assets I looked for were the ones that had cheap capital costs and low operation costs. I was on the lower quartile on most of my acquisitions and so the type of deposits I was looking for uranium deposits were in situ leach type of process.
“So it’s just being fortuitous and nose to the grindstone and every day we tried to find a way to find more value in the company.”
From a humble start in 2004, Matysek used both his M&A skills and his marketing skills to parlay his assets into a $19/share, $1.9 billion buyout by SXR Uranium One in 2007.
“It was a good call and all my shareholders made dollars,” says Matysek. “They made a significant amount of money.”
The other thing that’s important here is…potash, lithium and uranium are what I would call “private” commodities; they don’t trade openly like oil, gas, gold or copper. In each market, there are only a few producers—only a few potential buyers.
But in every case Matysek was able to secure the assets that these major producers wanted.
That’s why I put my money with Matysek. Yes I’m long.
Another big difference with lithium this time is…the growth rate is now so steep, and the physical shortages so real, Matysek says the industry will come to him.
“I think if we can demonstrate a project with any value, the LG’s, Panasonic’s, the Tesla’s of the world will come to my doorstep rather than the other way around. There are so few places to go. They’ll be sniffing around once you have something of value. It’s a race to try to get into production.
“So from a global perspective I think if we can demonstrate a better 2 or 3 year production path profile to these battery manufacturers I think we’ll be getting offers for offtake or for purchases. They want to control supply.
As I said, Matysek has already built and sold one lithium asset. He has come back to lithium because he sees the both the fundamentals and the Big Money lining up.
“In 2012; there wasn’t an Elon Musk; there wasn’t global warming becoming more evident. Grid storage wasn’t a big thing. The use of batteries, the proliferation of cell phones and everything we have is being electrified and that wasn’t reflected in the market. There wasn’t such a demand in 2012 but there surely and clearly is today.”
Matysek says the strategy for Lithium X will be similar to his other successful plays—find the lowest cost assets, and get them into his company by acquisitions or mergers. It sounds simple, but only Matysek has the track record to do it.
Lithium One’s first asset is in Nevada, right beside one of Albemarle’s (ALB-NYSE) producing lithium brine mines. But Matysek says he is already making his M&A list.
“We have our purchase in Clayton Valley Nevada and will drill that project in the next 6 months and get a resource. We’ll look at its viability and try to fast track that. It’s in Nevada and it’s a great place to do that. There’s money being offered to Nevada companies. We’ll try to expand and grow and get as close to getting as many near term production as possible. So we’ll use my expertise and contacts and treasury and hopefully the share price can afford to buy things.”
Where would that take him?
“I’m not going to tell you our strategic thinking right to the bitter end.”
Ha! Fair enough. The reality is when stock is this cheap, The Big Wins take time. But at Lithium X, history says I’ll be looking at a much larger share price at the end. At this beginning, it’s all about management and structure.
Management is big, and share structure is small. That’s the leverage I’m looking for.
Lithium X Energy Corp. management has sponsored and reviewed this article.