Lithium Americas - The Gordie Howe of Canadian Junior Lithium stocks?

Gordie Howe was my late great mother's favorite hockey player.  She taught me a song about him when I was a kid:

Gordie Howe is the greatest of them all

He can stand, while all the others fall

And when he skates down ice

He shoots he scores

We love Gordie Howe

Sorry I can't convey the tune here.  I guess I could make a video with me singing it, but given that I can't carry a tune in a suitcase, ugh.  This pathetic and miserable  little blog would lose the few followers its gained if I foisted my singing (sic) talents on here.  

Why am I comparing Lithium Americas with the legendary Gordie Howe?  Its the second line of that tune, "He can stand, while all the others fall".

Over the past few months LAC.TO has been having a nice little run, and is currently trading at $1.10 CDN, the highest price it has ever closed at.  That's just 5 cents from its 52 week high reached interday the past two trading sessions.  

That compares very well to a number of other junior Lithium stocks that climbed higher and faster, but that have since fallen back (or down). 

• Lithium X Energy (LIX.V) went to $2.85 in April and has fallen back to $1.70 now.
• Nemaska Lithium (NMX.V) reached a high of $1.97 in May of this year but now sits at $1.29
• Pure Energy (PE.V)  up to $1.15 in April now at .69 cents
• Dajin Resources (DJI.V) 30 cents in April 19 cents now

So why has LAC continued to uptrend while all the other juniors mentioned have pulled back?  

I think the mostly likely culprit is dilution.  

LAC has 295,311,916 shares listed as outstanding as of June 15th. There has been some dilution, but not very much.  In March there were 291,974,008 shares.  The increase to 295,311,916 amounts to 3,337,908 more shares or an increase of just 1.1%

Nemaska by contrast showed 206,715,385 listed as outstanding in March 2016, and now that number has climbed to 236,137,873 for an increase of 29,422,488 shares.  That's an increase of over 14%, or about 1,400% more dilution than what LAC has undergone.  And Nemaska recently announced a proposed offering of between 43,480,000 and 52,174,000 more shares priced at $1.15 expected on July 8th of this year.

It should be noted that, concurrent with this share offering Nemaska has received tentative approval for an uplisting to the TSX, and I do think that will help in attracting investors, possibly even institutions which tend to shy away from the riskier Venture exchange.  

Lithium Energy has seen even greater dilution in percentage terms.  As of March 15th the company had 43,820,732 shares outstanding.  The most recent number, current up to June 15th is 60,538,202 an increase of over 16.7 million or 38%.  

Pure Energy, however, has not seen any dilution over this period, staying at the same 66,2 million from March until the most recently available update to June 15th, so obviously the drop in PE.V is not attributable to the printing of more shares.  Perhaps if some Pure Energy shareholders are reading this they can comment.

Dajin Resources though conforms to the dilution narrative having gone from 118.4 million shares in March to 130.9 currently for an increase of about 10.5% 

There is one notable difference between LAC as compared to NMX, LIX, PE and DJI.  The latter four companies all trade on Canada's Venture exchange while LAC trades on the more regulated big board TSX.  It appears that with NMX joining LAC on Canada's big board exchange, they'll be going from the AHL to the NHL, in keeping with the hockey metaphor.

Here's hoping LAC continues climbing, skating down the ice and scoring for shareholders.  

I should note, there is one Canadian listed Lithium mining company that hasn't pulled back, Orocobre, (ORL.TO).  However unlike LAC and the others mentioned above ORL has actually begun production so I don't consider it a "junior" The PPS sits at $4.75, just off its highest ever close of $4.79 on June 23rd, and its 52 week high (achieved interday on July 4 2016) of $4.87.  

Full disclosure:  I currently own shares in Lithium Americas, hence my opinions are not without bias. I have no position, long or short, in any of the other companies mentioned.  Do note that I do expect to sell some or all of my LAC holdings at some point.  

Speculative stocks like LAC and the others mentioned here comport significant risks.  Everyone has different tolerances for risk and different investment objectives.  The bottom line is to sell for more than what you paid, nobody ever went broke taking profits.  

The comment field is always open, but it is moderated....comments that are abusive, contain blatant pumping or bashing, won't be approved.  Pumping and bashing include statements of opinion expressed as fact, such as "Gonna go much higher" or "Look out below".

Ellis Martin Report pulls Nemaska interview from their You Tube channel...

An interesting comment was put up on my Seeking Alpha instablog on a post about Nemaska Lithium.  The post had the subject line:  Why I got off the Nemaska Train Yesterday.  It was published on April 21st, before the birth of Avoid The Bag.  

In that post I included a link to an interview that Nemaska Lithium had done with The Ellis Martin Report, noting the extensive reach of this promotional firm with a radio network broadcasting into a lot of major US markets, places like NYC, Seattle, Houston, DC and more.

The comment came from someone with the user ID EllisMartinReport, representing himself as Ellis Martin.  In point of fact I believe it to be genuine.  I am as yet unable to verify the identity, but that ID has been on Seeking Alpha since 2010.  In the comment (which I will include) EllisMartinReport said the interview with Nemaska had been removed from their You Tube channel, and in fact it has been.

Here is the old URL:  https://www.youtube.com/watch?v=hKwgoxi8x0E&feature=youtu.be

There are also some other interesting comments which I will now share, to read it on Seeking Alpha just go to my original Seeking Alpha instablog post linked above:

*****************************************************************************

Hi Joe! 

After pulling my youtube piece on Nemaska from youtube this morning, I googled to see how the company may have been using me and/or my piece further. That's when I found your blog. 

It is absolutely true as you say in that most companies pay me for the exposure of their soft interview to my audience. I disclose that fully on my website and my radio program. I was asked by a friend as a personal favor to do a friendly interview on the company and another lithium company (PE) when they visited in Los Angeles. I reluctantly agreed, knowing the the lithium space might be over-hyped and these companies probably wouldn't pay for the advertising and audience that I offer. 

Note: How many people do you know that personally own an electric car? Secondly, do we not have an oil glut? I could go on and on. Does Nemaska have the best real estate in Quebec province for lithium? Probably yes. Is the lithium space a potential bubble? Probably. 

Was I paid by Nemaska for the interview? Much to my chagrin, absolutely not. Did they promise to do so? No. Was everything in the interview stated true? Most likely. I have received a comment or two from investors in NMX thanking me for my report even though they believed it was paid for...thanking me nevertheless. 

But I must state categorically in this and perhaps other blogs where I find information like this posted about my segment with NMX, that I do not recommend, nor do I support investment in this company or the lithium space, nor have I ever been paid to do so. As I've said to many who have asked and many who haven't, I am not a financial adviser or expert. I am a paid broadcast journalist and interviewer. 

I regret conducting the interview or airing the piece on my network, which was limited to VoiceAmerica.com and not the terrestrial radio stations you listed which are certainly part of my overall network. The VoiceAmerica Business Channel and YouTube alone are more than adequate in conveying a message however. 

Furthermore and finally...does anyone remember the rare earth space? Enough said. Thank you for allowing me the opportunity to publish this. Joe, you're a sharp guy. 

Yours, 

Ellis Martin. The Ellis Martin Report.

***************************************************************

There seems to be a lot of subtext here for those adept at reading between the lines.  Of course that`s assuming the message is genuine, and I believe it is.  What I find of particular interest is the parts in bold, that emphasis is my own not Mr. Martin's.  

It appears the interview was done as a favor, however from the tone of the comment I detect that Mr. Martin was likely expecting some kind of remuneration,  But it seems nothing was contractually agreed to and now he's more than a little put off in my opinion.

Does Mr. Martin have cause to be ticked?  If things played out here the way he suggests, then yes I do.  This interview took place on March 3rd of 2016 and was put up on The Ellis Martin Report's You Tube channel one day later on March 4th.  Did the interview have any impact on the trading of Nemaska`s shares?  I will let you be the judge, just look at what happened after that March 3rd date, both volume and the PPS exploded.

Was this the result of the interview?  That's impossible to say conclusively, but I do think it had some impact.  Of course Nemaska has been getting a lot of exposure lately.  The Midas Letter, Investor Intel, InvestingNews, the Las Vegas Lithium investor show, DecisionPlus...and likely a few more.  

I will keep watching Nemaska even though I no longer have any position, long or short.  I will be watching to see how things play out as they move closer to actual production sometime in 2018 barring any delays.  

Will Nemaska rebound?

I first started writing about Nemaska last year over on Seeking Alpha where I post under the same user name that I employ here, Joe Retail.  That was back when NMX was trading for about 15 cents on Canada's Venture exchange.  

http://seekingalpha.com/instablog/15663412-joe_retail/3902216-lithium-americas-and-nemaska-charts-and-insider-buying-have-me-bullish

I rode it for more than a 600% gain, but ultimately left a lot of upside on the table, exiting well before it hit its all time high up near $2 CDN.  That's okay, even when I wrote about getting off the Nemaska train I acknowledged that I was likely leaving too soon, that there was in all likelihood more upside.  I shared that with another SA blog post on April 21st, which was just before I started publishing my own blog here at Avoid The Bag.

http://seekingalpha.com/instablog/15663412-joe_retail/4875517-got-nemaska-train-yesterday

I admitted liking Nemaska even when I was selling, and in fact I still do....from a fundamental perspective.  I know, I can just hear both of my regular readers saying:

''FUNDAMENTALS'!?!?!  

''You're always writing that the fundamentals are already priced in, that's its old information that barely registers when you're making trading/investing decisions''.

And that is true, and ultimately its why I sold.  The lane that Nemaska was riding in on the investment freeway started going too fast for my liking, things were so good that everyone was moving in and I figured it was due for a correction....my timing could have been a lot better, but as I write so often, better to get out too soon than too late.

What do I like about Nemaska?  I have a patriotic streak to me, and I lived four years in la belle province de Québec, et franchement, Québec me manque.  Oooops, sorry.....latent French slipping out from my time living in French Canada.  I share the opinion that lithium is going to be hugely important, and a mine not only in Canada but also in my favorite province of Quebec, that's beyond awesome.

But as I've also written a few times before, a lesson from my late great father was not to fall in love with a speculative stock.  And with Nemaska not projecting an operating mine until 2018, there's still a lot of speculation left with Nemaska.  Everything so far has gone smoothly, but they're not yet in production.  As they get closer to to an actual working mine, a few snags and road blocks are probably to be expected.

Another concern is dilution.  Back in 2015 when I first bought in the number of issued and outstanding shares was around 190 million.  As of May 31st of this year that number had increased significantly, by about 45 million.  That's an increase of almost 25% to over 235 million.  

Also there's a chart you can find on line, several actually, which show the life cycle of a mine from start up to production.  The chart shows a rise, a fall and then another rise, with a trough in between. If Nemaska follows the pattern it should start on an marked uptrend sometime prior to full production in another two years or so. 

I don't think this chart pattern is one size fits all, but as a general guide I believe it can be useful. I would share it with you but I don't want to infringe on any copy written material.  You can google image search it and look at a few examples if you wish.

Nemaska, thanks to promotional efforts with Ellis Martin, The Midas Report, the Vegas Lithium investor show, and probably one or two others that I'm missing, it has had one helluva run.  And even though I am out right now I still check it from time to time.  The trough that the life cycle chart shows is the period when the hard work of building the mine is carried out, before it goes into actual production.  

We shall see how it plays out over the next couple of years.  In the meantime I'll keep looking for slow moving lanes on the investment speedway that look like they may start moving in the future.  

Stock Promotion - How much is too much? (Nemaska Lithium)

Over a year ago I had a brain storm, with so many devices powered by Lithium batteries, to say nothing of Tesla and the emerging market for EVs, investing in companies engaged in Lithium Mining seemed a pretty good bet.

But last year there wasn't the explosion in interest that I've witnessed over the past several weeks as the buzz about Lithium stocks has gone mainstream.  Last year I researched Lithium Mining companies, discovering that if I wanted to invest in a "pure" Lithium play, that I would have to pick from a number of Juniors.

There were, (and are) major players.  Established mining companies that are dominating the Lithium market place right now.  SQM, FMC and Albemarle are the three major incumbents, but for each one Lithium is but one small component of their mining operations.  While demand and prices for Li are growing exponentially, the impact on these major players is small because of how widely diversified they are.

Wanting to invest in a company that has Lithium first, second and last as their business focus, I had to opt for a Junior Miner, that is to say a company that wasn't yet operational.  After doing my research I settled on two, Lithium Americas and Nemaska, and I think I made good choices.  I blogged about it last year on Seeking Alpha:

http://seekingalpha.com/instablog/15663412-joe_retail/3902216-lithium-americas-and-nemaska-charts-and-insider-buying-have-me-bullish

Based on my research I liked the potential for these two to bring their plans to fruition, to graduate from the status of junior miner to profitable businesses.  Neither one has yet achieved that status, however they are both getting very close.

Lithium Americas has entered into a 50/50 Joint Venture with the aforementioned SQM on the development of their Argentinian mine which was just announced at the end of March 2016.

And Nemaska has garnered significant grant and investments from various levels of government in Canada, and is expected to announce a pre-paid off take agreement with a battery manufacturer within the coming days or weeks.

Both have been impressive in executing their business plans in my opinion.  But something happened recently with Nemaska which led me to sell my shares, that something was promotion.

I want to be perfectly clear on one point here though.  Promotion with development stage companies is to be expected.  Companies go to the public markets in search of capital in order to fund a business plan because, being in the development stage, they are not making money.  Having Investor Relationship firms promote a company is essential in raising the profile of a company in order to attract investors.  Companies can then sell shares to raise money and thus execute on their business plans.

But its a matter of degree in my view.

Nemaska has garnered non-repayable grant money from Canada's federal government from a fund for sustainable development, they've also secured investment from the government of Quebec as well as from the local Cree nation near the proposed mine site.  They are touting themselves as well financed, in fact Dundee Capital Market's analyst David Talbot said in a research paper dated December 15th 2015 that:

"Nemaska is fully funded through to Q2/17, the beginning of construction of the Phase 2 plant and mine site".

I won't bother going into my views on analysts that work for firms which provide Investment Banking services to public companies, needless to say there's already been mountains of digital ink spilled about the potential for conflicts of interest.

I will merely speculate on Nemaska's need to pay promotional outfits for exposure when they're already well financed and also receiving a great deal of exposure from mainstream media outlets. My own opinion is that they don't need to be doing much.

They have analyst coverage from Dundee, Stormcrow and Cormark.  In French language media they've been the subject of numerous stories via such outlets as TVA and Radio Canada and CEO Guy Bourassa has been interviewed on Canada's BNN (Business News Network).

Why would they need more than that?

Well, whether Nemaska needs to do more or not, the fact is they have been doing more and will be doing more going forward.

Back on March 3rd Nemaska's CEO was "interviewed" by "The Ellis Martin Report".  I put interviewed in brackets because, as per the disclosure on this outfit's website:

• The Ellis Martin Report is a radio news magazine broadcasted during market hours in 50 US cities and worldwide via the VoiceAmerica Business Channel.featuring potentially undervalued small-cap or microcap companies from a variety of industry sectors trading on a number of North American and foreign exchanges. Some analyst segments are sponsored and all company interviews and written reports have been compensated by the client companies featured. Invest at your own risk, as you may lose your investment.

I consider it a tad disingenuous to refer to something as an "interview" when the company being profiled paid to be there.  I always chuckle when I hear exchanges like:

Interviewer:  "Thanks so much for taking the time to talk with us today".

CEO:            "It was my pleasure, thank you for the opportunity".

To me that's like thanking an escort for taking the time to visit your hotel room.  For those who wish to hear the interview, it was uploaded to You Tube on March 4th, 2016:

They've also been promoted with "interviews" by InvestorIntel.  On top of paying these outfits, Nemaska is a sponsor for an upcoming Lithium Supply and Markets Conference in Las Vegas in May of this year.

Has all this promotion had an effect?  You bet it has, just look at a 3 month chart.  NMX on the TSX Venture exchange has gone from in and around 40 cents in February to its current levels in the $1 to $1.20 range.

Now, there are those who might suggest that my motivation for writing this blog piece is that....having sold out of Nemaska Lithium, that I am merely looking to justify my decision and to "bash" Nemaska so that I don't end up kicking myself if it were to climb substantially from its current PPS around $1.15

You might be surprised to know that I consider it very possible, and in point of fact likely, that NMX will trade higher.  "SO WHY DID YOU SELL THEN"!?!?!  I hear you asking.....

First I will explain why I consider it possible and in fact likely that NMX will trade higher.  Dilution is coming, in fact it already happened with more on the way.  As of March 31st of 2016 issued shares were listed at 207,475,385 and as of April 15th 2016 that number grew to 216,823,915 as per stockwatch.com for an increase of over 9,000,000 shares.

And if you go to Canadian Insider you will see that options in the millions have been granted this month alone.  (Canadian Insider Nemaska).

A market requires buyers and sellers, that is obvious.  And when its retail investors doing the buying because of something they heard on a paid interview or because of what some analyst has written, nothing in my opinion gets them more excited than seeing the PPS for a stock they're watching climbing.  "This must be good, look at the price...it keeps going higher, I better get in".

As for why I sold, take note of the Title for this blog.  Avoid the bag.  Nemaska is still a speculative investment, they are not projected to have a fully operating mine until sometime in 2018, and between now and then lots can happen, including the selling of a lot more shares.  I did very well with it, and if I left some money on the table by selling too soon, that's okay.  I believe it was JP Morgan who answered the question:  "How did you get so rich"?  With the answer, "I always got out too soon".

I'm still invested in Lithium America's and will explain why with my next blog posting.  For those who are looking at LAC and want a spoiler about what I'm going to write, I am expecting to see support for that stock firming up around the 65 to 70 cent area CDN based on my opinion of the emerging chart pattern.

DISCLAIMER

This is strictly an opinion piece, and my opinion could very well turn out to be wrong. This blog post is intended strictly for informational and entertainment purposes and should not be used as a basis for any investment decisions. Avoidthebag.com is not a registered broker or investment adviser.  Investing in stocks or options involves significant risks. For investment advice you should seek the input of a professional investment adviser.