Thursday, April 14, 2016

Beware of companies with lithium in their name



In Lithium it’s much clearer who are the current runners heading into the home straight. The question is how many of the names farther back in the field will make it to the finish line eventually and how many will end up in the glue factory.

After a long drought in the mining space the number of active listed players has thinned out while the number of shells available has risen. It’s easier to keep a shell in suspended animation in Canada than it is in Australia, so naturally the TSX-V has more shells on the beach than they have Downunder.

The relevance of this is (as we have seen before in Rare Earths) that the more potential vehicles available (and the duller the other options are, like gold exploration for example) the greater the temptation will be to repurpose a shell as a Lithium play. The only “limitation” is the lack of moose pasture (or kangaroo paddock) with some whiff of Lithium in the mineralogy.

Ergo, if the other mining sub-sectors don’t pick up all that fast, more of the bottom-fishing promoter types will be tempted to spin the Lithium Wheel of Fortune by repurposing their spare shells into a play in the sexy “new” space.

Every time their is a new boom in a commodity or a new investment fad then the stock promoters in Vancouver get cranked up and begin creating new companies and selling shares to the gullible retail investors. They take a shell company that has no actual properties or a management team with any knowledge or experience in the field and slap a new name on the company and then hit the promotional circuit. The same thing is happening now in the lithium space. 

All kinds of moose pasture will now come to market to satisfy the demand for shares that the shoe clerks and cheap seats will buy up. I will stick with companies who are actually producing the metal. I simply do not have the time or inclination to wade through all the BS that is flowing out from these promoters. If you want to invest in the lithium space stick with the producers. If you want to gamble, don't buy junior lithium stocks go to Las Vegas at least you will have fun while losing your money. 

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