“Canada’s Massive Mine” owned by “One Tiny Explorer”

Nick Hodge's tease for "1.4 billion ton mother lode" for his Early Advantage newsletter

By Travis Johnson, Stock Gumshoe, March 12, 2012

This teaser ad has been around for a few months in various forms, but it continues to be among the most-queried pitches here at Stock Gumshoe, and there’s a big new push for this ad just today that’s generating even more questions — so I thought I’d toss you a quick reminder of the details here as I while away the time in a generic waiting room.

The pitch is for the newsletter that’s now called Early Advantage, edited by Nick Hodge — it used to be called Alternative Energy Speculator, but newsletter publishers are nothing if not sensitive trend-followers, and they’ve noticed that “alternative energy” tends to make people grumpy now following the flameout of all those solar energy and geothermal investments … so the letter is now called Early Advantage and it seems — if this latest ad is an indicator — to focus more on resources and breakthrough technologies, the same kinds of stuff we’ve seen pitched over the years as “building blocks” for new energy technologies like graphene, rare earth elements, and lithium. (A bit of a shame, actually — they did have some interesting picks in alt energy, including a very early tease of Westport Innovations four years ago that would have made patient investors a lot of money).

This latest ad continues their push or the “massive mine” in Canada that has 100 years of valuable metals ready for production — not only base metals like copper but also many of the key rare earth metals. It’s all about harvesting the black shale of Alberta using bleaching, which is basically using bacteria to eat and help “compost” huge heaps of ore and produce a smorgasbord of valuable minerals.

And yes, they’re still teasing the tiny company DNI Metals (DNI in Canada, DMNKF on the pink sheets), which has just about tripled since their “secret” teaser campaign started for this stock back in November (and yes, I told you about it then, too). And though it’s never easy to tell what might happen to a sub-$50 million company, I remain quite cautious about the stock but it’s an interesting story that might turn into something over the long term.

You have to draw a line somewhere when you’re talking about a $50 million company with hundreds of billions of dollars of potential metal that might be extractable — really, when you think about something this big but this early on and relatively untested (only one bioleaching project has ever been done at scale, and it’s pretty young still), a little sneeze on your spreadsheet could easily make you change your valuation of the company from $10 million to $200 million or back again. Every speculator has to make that call on their own based on your guess about how long it will take to test their metallurgy and bioleaching recipes and how the economics of the whole project might eventually work out (which itself probably depends quite a bit on where prices for molybdenum and copper and other base metals are in five or ten years).

If you’d like an update, the stock has been continuing to climb based both on continuing attention from Angel Publishing and, more recently, thanks to their presentations at the PDAC Conference that always gets the attention of natural resources investors — you can see the story summarizing their PDAC news here — the CEO is basically saying that they’d like to partner with or sell the project to a big steel or mining company, and that “in the right hands” they could be producing in four or five years. So judge that how you will.

The other picks being teased, just to toss out a couple other ideas for you, are for graphite and lithium and beryllium. The graphite pick, teased as a play on the high-potential new nano material graphene, looks like it’s probably Northern Graphite (NGC in Canada, NGPHF on the pink sheets), which is trying to restart an Ontario large flake graphite mine. Haven’t looked at this one in a while, I seem to recall that they launched as a spinoff or a reverse merger or something a little bit unusual like that, but the project is fairly far along with permitting expected in the coming months, you can see their investor presentation here if you’re curious.

He doesn’t tease the specifics of lithium particularly, but says he’s found “three ways” you can take advantage of big new lithium demand — so I’ll just throw out the big names for you, the global low-cost lithium brine producers SQM (SQM) and Rockwood Holdings (ROC) and FMC Corp (FMC), with ROC and SQM both having been teased many times in the past, are easy picks to make in the lithium space. All have other businesses and all are profitable and large, so they’re not just lithium plays and won’t be leveraged to huge new discoveries or anything like that, but there are plenty of junior lithium companies around as well if you’re interested in sniffing out some riskier potential — the two that I hear about most, for whatever that’s worth, are Western Lithium (WLC in Canada, WLCDF on the pink sheets) in Nevada and Talison Lithium (TLH in Canada, TLTHF on the pinks) in Australia and Chile.

And finally, he teases beryllium as a way to prevent future nuclear meltdowns — and I’d guess, though there aren’t any company specific clues for that one, that he’s pitching IBC Advanced Alloys (IB in Toronto, IAALF on the pink sheets), another gee-whiz new materials company that has been teased many times before by several different publishers. That one has mostly traded in the 15-cent range over the past few years, except for a few times when it has been teased by newsletters and driven up to the 25-30 cent range, starting in early 2010 with a tease from this same newsletter and continuing with Byron King’s pitch for this as a play on the “fourth element” last Fall. Seems like a great story that hasn’t been able to turn into a real business (yet, at least), with revenues growing much more slowly than the share count in recent years.

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