Nevada Sunrise DDHad the opportunity over the past few weeks to complete my due diligence on Nevada Sunrise and have taken a position in the company. Lithium in some circles, is now considered the “new oil”. Although not an energy source, it has great capacity for energy storage, which allows us to use many different alternative energy sources for lithium batteries. Tesla has recently (new gigafactory) ignited the Nevada Clayton Valley land position craze, to exploit what many consider to be a very large brine hosting area rich in lithium deposits.
The Silver Peak mine located in the Clayton Valley, has been in operation since the 1960’s and utilizes an evaporation pond technique to produce lithium from brines. Technology made by Tenova/Bateman and others, allow the production of lithium from brines utilizing a mechanical process with a very small environmental footprint. In addition, Tenova/Bateman maintains that it is feasible to produce lithium utilizing their method with as little as 20 ppm lithium in brine. Traditional evaporation ponds take approximately 18 months to produce lithium. Mechanical processes take 8-16 hours to produce lithium from brines.
Lithium prices have been soaring recently (from $6,000 per tonne and now approaching $10,000 U.S. per tonne). It appears that demand will be outstripping supply for the foreseeable future. Increasing infrastructure is being constructed to support the coming wave of fully electric vehicles (charging stations, battery capacity etc.). With environmental laws becoming evermore stringent as it relates to fossil fuel burning vehicles, the case for electric vehicles becomes stronger and stronger.
There are number of items that I considered prior to taking a stake in Nevada Sunrise. My interest was initially peaked earlier this year when I took a small position in Pure Energy and watched it soar from .22 to 1.03. I sold my position much too soon, but learned that the TSX-V mining sector was not completely decimated and that it is possible for a small junior in the lithium-brine sector located in a politically stable and mining friendly area of the world to succeed.
First on my list, was management. No sense being involved in a company that does have the expertise to exploit the potential resource. Warren Stanyer (company CEO) has a history of being able to carry projects from inception through to sale with a larger entity. Warren was involved with Pioneer Metals Corp. until it was acquired by Barrick Gold. He was the CEO of Northern Continental Resources, that was acquired by Hathor Exploration. In addition, Warren was also involved with UEX & Alpha Minerals - both successful ventures. In short, Warren knows what it takes to build a successful junior exploration company. He took over as the full time CEO in April of 2014. At that time, the company was exclusively focused on their gold projects. Apart from the recently acquired lithium land position, the gold resource that has been defined at Kinsley Mountain has been simply outstanding. Partnered with Pilot Gold on Kinsley, the intercepts have been nothing short of world class. In 2014, the Nevada Sunrise share price soared to $1.50. Fallen significantly since them, but the resource remains.
In the summer of 2015, the focus shifted to lithium and more specifically a land position in Clayton Valley. Knowing where to stake your claims is obviously important, but having the premier person in the area to join our team, Dan Zampirro, says a great deal. Dan worked for Silver Peak mines since 2000 where he was in charge of the lithium well-field system, selection of drill sites for well production, delineating the aquifers in the Clayton Valley, and supervision of exploration drilling to delineate the reserve potential of lithium-bearing brine. Don’t think you can have a better person doing your staking than Dan Zampirro.
Next, we had Dr. David Shaw join the team. David Shaw has extensive knowledge of lithium brine projects in South America (more specifically Chile). He was Chairman of Salares lithium from inception until it was acquired by Talison Minerals Pty. Of Australia to form Talison Lithium Inc., the world’s largest pure lithium company. Dr. Shaw served as a director of Talison until it was acquired by Chengdu Tianqui Industry Co., Ltd. In 2013 for $800 million. This man obviously has important connections in the lithium world.
Of course you need some local flavour as well. Trevor Wilson (part of the Yorkton lithium cartel) joined the advisory board in September 2015 as well. He has raised millions of dollars for junior mining companies and is certainly a very well connected person.
It’s great to have expertise, but you need a land position as well, with the right address. For a company like Nevada Sunrise to be successful, you probably need a minimum of 3,000 acres with the right address. Nevada Sunrise acquired the Neptune property in September that is approximately 6,320 acres. Three drill targets have been identified and each has lithium bearing plants at service (11-35 ppm lithium). In addition, the CSAMT survey seems to have given us the right signature for brine-rich aquifers. Drilling will be carried out shortly (probably within Q1 of 2016) to depths of 400-500 metres. To put it simply, I like my chances. Once the drilling starts, it’s just a matter of days before we know.
Neptune is the flagship, but NS has also acquired 2 additional properties in the area. Once, again under the direction of Dan Zampirro. Gives us a total of approximately 10,000 acres in the area. More than an ample land position.
Capital structure is decent. There are approximately 41,000,000 shares O/S fully diluted. Some pressure was on the stock recently due to tax loss selling (I know, I know it’s a common excuse for poor share price performance, but there is some legitimacy to the argument with respect to Nevada Sunrise). In addition, there are some 4-5 million warrants coming due at .15 on January 10-16. In one way or another, this will be taken care of in the next 2 weeks and with how the bid/ask has been in the past few days, I suspect that much of it has probably been taken care. The other 4-5 million warrants are priced at between .25-.50 and won’t be a problem in 2016 as they come due in mid 2017 through 2018.
In summary, we have world class management, we have a great land position and it appears that we are about to execute on a plan. With the needed money to carry out the upcoming drill program, I think that by March/April of this year we will know what sort of lithium projects we have. If Pure Energy is any indication of what can happen, we might be very pleasantly surprised with multiples of the current .22 share price within a few months. Don’t think you can get hurt much at .22 as the gold resource is worth more than this on it’s own. Let’s see how this unfolds.