The rapid rise in the value of Amerilithium shares has one Stockhouse poster wondering if there is anything more to this Bulletin Board stock than just hype.
As turmoil in the Middle East and North Africa dominates headlines and oil trades at more than $100 per barrel, alternative fuel exploration companies are popping up in promotional stock alerts.
One of the most prominent in recent days has been U.S. Bulletin Board-listed Amerilithium Corp. (OTC: BB: AMEL, Stock Forum), which has been heavily promoted in paid advertisements on the Beacon Equity website.
In a February 28 alert that cost $50,000, Beacon noted that Amerilithium has been nothing but easy money after steamrolling up the charts with an 87% gain in just two days. It also predicted that the Nevada-based company could become a target for car and battery manufacturers.
These predictions, outrageous to some observers, have helped the stock to double in value in recent months, even though Amerilithium has no revenue and has yet to drill on any of its exploration properties in Nevada, Alberta and Western Australia.
After Wednesday’s 10% rise to 48 cents, Amerilithium has achieved a market cap of $30 million based on 67 million shares outstanding. The 52-week range for the stock is $3 and 20 cents.
Such an expensive promotional effort – Beacon’s parent BlueWave Advisors had previously been paid $180,000 for AMEL advertising – prompted one Stockhouse poster to wonder if there is anything other than hype to back up the recent stock market rally.
The short answer: It’s hard to tell.
Lithium is an industrial chemical that is used in everything from heat-resistant glass and antidepressant drugs to lithium batteries. Most commercial lithium is recovered from brine sources (salty marshes and reservoirs) in Chile, but it can also be recovered from hard rock.
Analysts say lithium is generating a lot of excitement because the public is starting to recognize what the electric car might be able to do and the role that lithium plays in the production of efficient batteries for electric/hybrid cars. Investors be advised: “This all happened the same way exactly two years ago this month,” says Thom Calandra, Stockhouse editor of the Ticker Trax service. “The Li factor took many of these equities to absurd levels.”
Investors in this day, week and month of $102 oil are seeking companies that can produce lithium inexpensively from salty brine deposits, said John Hykawy of Byron Capital Markets Inc. in a recent interview with the Energy Report.
What is needed, he said, is a high enough concentration of lithium in the brine to make it worthwhile to process. But in order to be viable, the brine must also have a low enough concentration of contaminants such as magnesium and sulfates so that they don’t negatively impact the cost of the lithium.
The top of the range is 2,000 parts per million (ppm) of lithium, which is common in Chile off of the Atacama Desert. Anything over 880 ppm is a very strong deposit, Hykawy said.
Formerly known as Kodiak International Inc., Amerilithium is an exploration stage company that has assembled a lithium property portfolio consisting of 724,000 acres, in Nevada, Alberta and Western Australia.
According to regulatory filings, the company reported a net loss of $162,711 or (
.0027) in the three months ended September 30, 2010 on zero revenue, compared to a loss of $10,994 or (
.0002) in the same period last year when revenue was also zero.
At that time, it had $318,155 in cash.
Under a financing agreement reached in March 2010, Amerilithium agreed to sell up to $10 million common shares to Sunrise Energy Investment Ltd. of Oslo, Norway, which is providing the junior with a line of credit.
At that time, the shares were trading in the $1.50 range after touching $3 on March 16.
Regulatory filings say the common shares that Amerilithium agreed to sell to Sunrise have an attached warrant to purchase future shares for $1.60.
Due to the fact that Sunrise’s average costs are above the level that the shares are trading now, some observers are speculating that it may have wanted to liquidate some stock at higher prices. However, Amerilithium spokesman Ryan Troup said he believes there is no connection between Sunrise and the Beacon Equity stock alerts.
Meanwhile, the promotion effort comes as the company says it is getting ready to start drilling on its 5,880-acre Paymaster Project in Nevada. On February 24, the company said it has entered into a drilling contract and is planning to drill eight holes at Paymaster, which is northwest of Las Vegas.
Troup said he doesn’t know what the drilling program will cost. But he said the company is planning to drill three holes. Depending on the results, the company will then decided whether or not to drill the remaining five.
Paid Ads: They Work
In the paid advertisement on February 28, when AMEL was featured as Beacon Equity’s Focus Stock, Beacon said it’s not just the company’s lithium that may get bought up. “The whole company could become the property of a battery manufacturer or car manufacturer,’’ it said.
What the paid advertisement didn’t say is that the junior has no revenue and is only close to digging for lithium. The advertisement could have said the stock’s recent rise has been great news for people who got some of the 4.6 million unrestricted shares that were issued between 2005 and 2008 at prices ranging from
.001 to
.04.
But it hasn’t been so great for people who bought in when the stock was trading closer to the 52-week high of $3. Investors who buy the stock now are buying a $30 million company that hasn’t done anything yet … and perhaps never will.
By the way, there is a lot more developed and better funded competition out there.
They include companies such asTalison Lithium Ltd. (TSX: T.TLH,Stock Forum), which is developing hard rock deposits in Australia as well as lithium brine projects in Chile,Western Lithium USA Corp.’s (TSX: T.WLC, Stock Forum) is working to develop a low cost brine project in Nevada. Rodinia Lithium Inc. (TSX: V.RM, Stock Forum) recently tabled a resource estimate for its Salar de Diablillos lithium brine project in Argentina.
On March 2, Rodinia said the resource estimate reports an inferred brine resource of 932,000 tonnes of lithium metal, 10,404,000 tonnes of potassium and over one million tonnes of boron (a chemical element used in the bleach and fiberglass insulation).The company said the estimate could represent one of the largest brine resources in the world.
Canada Lithium Corp. (TSX: T.CLQ, Stock Forum) has also been working to develop a hard rock lithium deposit in western Quebec. However, the stock fell 19% to 72 cents on Wednesday after the company said the project may not be as large as previously thought.