P2P Car Sharing, Li Funding, and Tesla in the Spotlight

July 24, 2018


A lot has happened over the past few weeks in the lithium space.  As always, we’ve got you covered with highlights of the more interesting stories.

Miners

Pilbara Minerals’ stock has seen some strength since the beginning of July.  While we’ve been bullish on the name for some time now, we recently shared our thoughts on what’s been driving the stock and how the valuation currently fares.

Many lithium stocks have basically been trending sideways after the major selloff to start the year.  During this phase, every upward blip has quickly been sold off, with the most recent example coming in Albemarle Corp’s stock just last week. This phenomenon caused us to analyze the short interest plaguing the sector, and what might drive those shorts to unwind in a piece that can be found here.

Bacanora Minerals announced a $100m equity offering before scrapping those plans later in the same week, citing challenging market conditions.  The company will continue discussions with investors to find alternative ways to fund construction of their mine in Sonora, Mexico.  Despite having one of the more interesting brine projects, this news is significant as it continues to show investor sentiment toward both the lithium space and particularly the development stage lithium juniors.

Plateau Energy Metals, which is exploring a uranium/lithium project in Peru, announced a maiden mineral resource estimate as shown below. We’ve spoken at length with management in the past and a few points stick out to us here.  First, while the grade is not very high the lithium is essentially contained in volcanic glass with lower impurities, and less heating requirements in the conversion stage than pegmatite formations, which is expected to help keep extraction costs low. Next, we knew that the project deposit was very large, and these numbers only confirmed that. The company defined indicated and inferred resources containing about 4.5Mt LCE, but noted that they’ve based the estimates on drilling in only 20% of the potential deposit area.  Summary of the resource estimates:

  • A. Within the Li-rich tuff sequence, only:
    • Indicated Mineral Resources: 34.82Mt at 0.73% Li2O containing 0.63Mt Li2CO3 (equivalent)
    • Inferred Mineral Resources: 77.80Mt at 0.73% Li2O containing 1.41Mt Li2CO3 (equivalent)
  • Within the wider Li-rich package including the upper and lower breccia units:
    • Indicated Mineral Resources: 40.58Mt at 0.67% Li2O containing 0.67Mt Li2CO3 (equivalent)
    • Inferred Mineral Resources: 121.70Mt at 0.59% Li2O containing 1.76Mt Li2CO3 (equivalent)

Downstream News

Switching gears a bit from the lithium producers to the more downstream players, GM launched a peer to peer car sharing service, allowing individual GM owners to rent out their vehicles.  This service extends their previous car sharing service, and is another step for the company toward the future of mobility powered by lithium.

Finally, it seems Tesla is finding themselves in the news every single day lately, as shown below:

  • The company’s head of sales became the latest executive to leave the company. Ganesh Srivats has decided to join online luxury retailer Moda Operandi as CEO.
  • As Tesla has scrambled to churn out as many Model 3’s as possible, the NY Times reported that the company is seeking to get cash back from suppliers in an effort to become profitable.  However, we’d like to note that while the disclosure of such a story to the media probably speaks to the state of Tesla’s relationship with suppliers, discussions or negotiations like this between autos and suppliers is pretty common.
  • Elon Musk is known for his visionary mind, fearless entrepreneurial spirit, and creative designs, all of which helped him cultivate a Twitter following similar in magnitude to the population of Australia.  However, his unfiltered tweeting is leading many to think of him in a similar light to the POTUS, Donald Trump. In a recent piece, Fortune debates whether Elon Musk is too volatile to run Tesla and SpaceX.

Stay tuned via twitter and email to get our analysis and updates as they hit the tape!