Gambling Greenie  28 November 2018

The lithium leotard theory

GG Tally 281118003

The Gambling Greenie’s portfolio on November 28.

INVESTING IN speculative stocks, particularly those trading for a few cents each, is like following fashion.   One month something is all the rage — geothermal energy or rare earths or some biotech, the latest battery, or graphite.   Then attention switches to the latest new thing and the price collapses again.  Your 20c star is now worth two-and-a-half cents and yes, your bum suddenly looks fat in leotards.

Lithium is a classic example.  One of the world’s rarest metals, it is a vital component in lithium-ion batteries.  Thanks mainly to the growth in the hybrid and all-electic car market, the price of lithium began to accelerate in 2014.  In 2015 it was around $5,000 a tonne and early this year hit a peak of over $20,000 a tonne.  It has since dropped 50 per cent, but seems to have stabilised at the lower level.

When the stock market saw the rising lithium prices, the effect on some of the stock market’s tiddlers was dramatic. Gold junior De Grey Mining, for example, was six cents in September last year.  Then it announced that it would start drilling for lithium at its King Col prospect in WA.  Less than two months later, the shares (ASX code DEG) had soared to 36c.   When last seen, the shares were flatlining at 12c — despite the fact that the latest couple of drilling results this month confirmed that it does have high grade lithium at King Col. 

The grandly named Lithium Australia (LIT) has a similar history.  Six cents at the end of  September 2015, soaring to 35c  six months later,  and then down 40 per cent in a fortnight.  The shares are now10c, after sliding steadily all year.  If the price rises just one cent, sellers are already queued up to dump a couple of million shares on the market. LIT is about as trendy as a beehive hairdo.

Nevertheless the GG has decided to splurge a couple of thou ot pick up 20,000 LIT.  What makes them interesting is that their main focus has been on finding a better or cheaper way to process the stuff (lithium is not found in its pure state) and to recycle the lithium in clapped-out batteries.

You have been warned

THE GAMBLING GREENIE  is licensed by the South Australian government to drive a moter vehicle. He is not an adviser and has no links to the financial services industry. If he finds a guaranteed way of making serious money on the stock market, he won’t tell anyone.

He may at times own shares mentioned in the column, but does not trade in any such shares for at least two working days after publication.

On November 22 it reported that its Sileach process had produced a product containing more than 90 per cent trip-lithium phosphate from mine waste, and that its subsidiary, the Very Small Partical Company, had succesfully manufactured a liithium ion battery using the mine waste product.

On November 14 it said it had agreed “in principle” terms of a partnership with an unnamed battery researcher to develop a graphite/silicon anode to improve battery performance.

Lithium Australia is not the only company seeking to improve the processing of lithium.  Lepidico (LPD) is also developing a pilot processing plant using a somewhat different process, focusing initially on lepidolite ore.  The two were involved in a bitter legal patent dispute in 2016.  Lithium Australia lost that one, and then early last year launched a takeover bid for Lepidico, which was eventually unsuccessful.  Good reasons, perhaps, not to invest in either company.

The GG, being an inveterate optimist, is betting that the lithium price does not have much further to fall, given the rapid growth in electrical vehicles.  While Lepidico is primarily a lithium miner,  the GG likes Lithium Australia’s apparent success in developing innovative ways of extracting all forms of lithium silicates to make the litihium chemals used in the energy industry.   And being a bit of a greenie at heart, he likes its ambition to eventually include recycling spent batteries and e-waste.

Meanwhile, the energy storage company 1414 degress (Going for a hot stock) has made progress on its plans to install a pilot Themal Energy Pilot System (TESS) at a cardboard manufactuiring plant in Victoria.   It was announced in April that the pilot  TESS would be installed at Austcor Packaging, but no room could be found for it, so Austcor’s majkor shareholder, ABBE, will take it instead.

The company’s shares (14D) have remained stubbornly above the GG’s 25c bidding price, despite some sharp falls in the stock market,  but were only half a cent above his limit at one point on November 28.  The GG has decided to wait, rather than lift his bid.

Updated November 28, 2018

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