Post by
Ezmune on Jan 23, 2021 2:45pm
My DD on Pure
Hey everyone, just wanted to throw my DD out there for people to read, there seems to be alot of new interest in Pure Energy, which is great! But it's not simply for any 1 reason specifically.. they've got ALOT going on and it sounds like it will all come to fruition this year. I've been following Pure Energy and the Lithium/Nevada space since about 2015, here are the things I'm seeing, hearing and speculating! Everyone knows the significance of the location of Pures property claim situated next to Albemarle's silver peak mine, and a "stones throw away" from Tesla's gigafactory.. not only is the proximity a big bonus for us being so close to two giant industry leaders.. but the resources theyve discovered underneath is one of the largest Lithium Brine deposits in North America.. The resource itself being Brine holds significance because of its low impurity, it's cost effectiveness(vs clay or hard rock), and the proposed technology will be revolutionary in environmental standards.. the last point is extremely exciting because with the new Biden administration and culture we live in these days.. environment is a big deal! Now we can get into some more exciting stuff! Pure Energy has partnered with Schlumberger to engineer and build the (highly anticipated) pilot plant as well as to fund the build, to put it into perspective, Schlumberger is a GIANT company, with a market cap of $34B(USD I believe).. Schlumberger expertise is in oil and well drilling, processing, production.. etc etc they're a massive international company that's signed an earn in agreement. To put this into perspective since everyone is always wondering if Albemarle will get involved with Pure etc, Albemarle marketcap is $18B.. Pure Energy is already working with a company DOUBLE the size of Albemarle(but I have my ideas about Albemarle's involvement below) I see alot of criticism of Pures lack of progress or news releases over the last couple years, which I share the frustration, but having spoken to the company and listening to the AGM.. their silence is not from neglect or indifference.. Pure Energy is currently at the mercy of Schlumberger as far as news and information goes, from what I've been told, Schlumberger is running all the tests, doing all the foot work, research, engineering etc. That comes with the development of a pilot plant. Because Schlumberger is taking the lead on this, they control the flow of information.. Now for the Pilot plant.. without speculating too much, it's my guess that information regarding the plant and the approval of permits is close.. taken from their AGM presentation they've mapped out their intentions of beginning site preparation and construction in 2021, the issue of water rights is no more, Pure Energy had been awarded water rights for the pilot plant back in January of 2019. As for share structure, this is tight, and can move fast on the smallest hints of them becoming successful, only 32M shares, 30% of which are owned by big companies (Schlumberger, Next view- Lithium X, and geo xplore). They recently cleaned up the company shares by the share consolidation, after months of the stock taking a bit of a hit, this seemed like another kick in the pants, but just remember, Schlumberger and LiX had to agree to this as well, and presumably all found it to be mutually beneficial.. (again without speculating too much, makes you wonder why an industry leading company would clean up their share structure right before some potential major events are about to occur, are they creating a cleaner company on paper in anticipation of another player coming in? A reverse merger as a shell? A buy out?.. again all speculation) Staying on the topic or the company shares and share price, I want to try and draw some comparisons from the industry, I believe as the current market cap sits now, we are extremely undervalued.. Pure Energy as of previous close has a market cap ~$70M.. compare that to one of their boardering neighbors, Cypress Development, which has a market cap of ~$180M.. just for the sake of playing catch up.. Pure's stock price at $180M would be roughly $5.60cad(and that's without any new material information coming out).. also, without being negative, Cypress' property is claystones which is a less cost effective resource vs Brine to extract, as well, Cypress doesn't have water rights, you can't operate a mine or pilot plant without water rights and you can't transfer water across county/state lines.. so my understanding comparing resource to resource, Pure should be worth more than $180M based off resources.. Another comparable of a similar company farther in the process and operating is Standard Lithium, they have quite a large property processing lithium brine, Standard Lithium's market cap as of today is $455M, will the market wait for Pure to be fully operational to give them this evaluation? Or will speculation and a hot sector push them this high once information on the pilot plant get released? My guess is that with the future of EV and the demand for Lithium, the market won't hesitate to bring Pure's evaluation close to or similar to this market cap. $455M market cap for Pure would be around $14.. (couple notes on standard vs pure, comparing projections of output and resources etc, from quick glance it looks like standard lithium has a higher yearly output if we base this all off of the old PEA and feasibility studies done by Tenova Bateman.. but we know that Schlumberger is doing a new or revised process, *hoping it beats the previous process*. Also, knowing how Standard Lithium derives some(or all?) of its Brine from recycled oil wells, I question the direct compatibility between impurity levels, if Pure will be more cost effective and efficient having a more pure brine resource) To touch on the subject of Tesla and the previous deal, back during the first Lithium craze Pure signed an offtake agreement deal with Tesla to supply Lithium, but this was contingent on delivering battery grade lithium by a certain date, my thoughts are that Pure took advantage of this deal to gain interest, raise money, and get a foot in the door with Tesla.. the difficulty is that to go from resource in the ground to lithium in Tesla vehicles takes alot of engineering, money, construction, testing etc etc etc.. although it would of been ambitious to deliver, there is ALOT required to become a fully functioning/operating mine.. but, with partnering with Schlumberger, we're well on our way to making that happen, and as I stated before from the companies 2021 outlook, we will see the beginning of the build very soon. I'd be hard pressed to believe there is any hard feelings between Pure and Tesla.. it's business, Tesla needs Lithium, Pure needs customers, they both have each other's numbers and I'm sure they are more than happy to ink another deal once the wheels are in motion again. Another thought of mine regarding Tesla is that everyone knows he's big on securing American/North American resources for his builds, he'd be quite silly to let this little gem in Nevada slip away and let all the lithium be supplied to China or another country/company.. the precious metals war is heating up a bit as countries and companies are trying to secure resources.. plus the proximity to tesla, C'mon... Speculation: This is my prediction, I'll start with what I believe is the most realistic scenario.. 1. Albemarle, Pure energy and Schlumberger all team up and contribute to making this project happen.. we're all aware of Albemarle's recent NR stating their desire to boost production at their Nevada facility. How I believe they will enter into some form or agreement is by coming in not only with their market knowledge and environmental and metallurgy expertise, but they will also supply the infrastructure from their silver peak facility.. this could fast track the Pilot Plant construction by not having to build from scratch but utilize what's currently available, power, roads, and any other utilities they currently have.. Albemarle hasn't been producing at silver peaks for some time, and has put the facility on maintenance, makes you wonder why they'd be up keeping the property if they had no intentions of using it sometime in the near future.. This makes the most sense to me and it's without wild dreams of buy outs or take overs, mergers etc. 3 power house companies working together, Schlumberger with their drilling and engineering technology, Pure energy with the resources, and Albemarle with the market/industry expertise and infrastructure.. again, it seems too farfetched that Pure and Alb wouldn't team up given the proximity... 2. Given the recent share restructuring and clean up of the company, it looks to me that there's the possibility of either a reverse merger through the act of Pure being the shell, or a buy out.. seems odd that after all this time their priority would be to clean up the company.. I had missed portions of the AGM, but from rumors it sounded like Mary had elluded to something within the nature of a larger company coming in possibly? Or they'd be open to it possibly.. not sure If that's the case these are the 2 scenarios if possible companies - Schlumberger has a private company that is focusing on green and alternative technology, their business model seems to be positioning themselves for the future and using their drilling and technology expertise to grow their company with the changing economy towards green and green alternatives, if that's the case.. they could potentially take their current private "green arm" company public through reverse merger with Pure. - the next possible scenario is the most obvious.. Albemarle takes over Pure. This one's on everyone's mind, the location, the current business model, the infrastructure.. they've just been sitting back and letting Pure do all the ground work and prove feasibility, once it's a viable operation.. they will come and take over. Why else would they buy the property and let a penny stock from Canada develop it to the point of them possibly losing the resource beneath them.(David vs Goliath?) Conclusion, I think Pure has alot going for them.. they're currently extremely undervalued and we should see a steady climb up to a new baseline price that matches current industry values and with the addition of the pilot plant, succesful processes etc, and potentially new players involved.. this will take us much higher! Cheers