We’ll start at the end today, this is from the order form for Casey’s International Speculator…
“It’s a $33 billion rollout of liquid electricity across the nation by big business… and several government agencies. It’s a historic opportunity backed by Executive Order 13817, and big fish like Amazon’s Jeff Bezos, Bill Gates, and Richard Branson (and top investment banks) are streaming into this space.
“I understand it could mean up to 64 times my money and time is of the essence. Plus, this special savings will disappear soon.”
And, of course, all that urgency is designed to let you “lock in” your annual subscription to International Speculator for $1,995 (no refunds, though they say they’ll credit you toward a different Agora-published newsletter if you don’t like this one — they key with all the high-end letters, of course, is to get your money and get you comfortable with spending a couple thousand dollars a year for ongoing investment research, they don’t care which product you choose).
So hold off a minute, let’s figure out which stocks they’re teasing, then you can make your decision. Don’t ever commit to a high-priced subscription just to find out the name of a “secret” stock, it’s both literally and psychologically expensive (once you pay for an idea, you lose much of your ability to think about it critically — only a dummy would spend two grand and then NOT buy the stock they’re touting, right? And I’m not a dummy!)
Which means we need to scour through the “presentation” to get some clues for you. The ad comes from Dave Forest, who runs this newsletter for Casey (now owned by Stansberry), and he starts us off with a very mysterious-sounding reference to “liquid electricity cubes” — which means this is my very favorite kind of ad, the ones that make up new terms to hide their ideas behind a cloak of mystery. Here’s a taste:
“… thanks to Executive Order 13817, “Liquid Electricity Cubes” could soon be installed nationwide to shield local communities.
“Bloomberg reports these ‘cubes’ are a mega-industry set to explode as high as 6,400%. Here’s how you can cash in this year…”
We get all kinds of exciting graphics, too — President Trump signing his Executive Order, a photo of a strange looking box that looks somehow electrical, some maps about where these “cubes” are already deployed….
“One of them is in place to shield a Social Security Office. And there are plans to protect more so benefit checks can be cut without interruption.
“There’s one to protect the New York Stock Exchange so the estimated $169 billion in daily transactions continues.
“The Food and Drug Administration has one.
“The U.S. Army just set up a huge Liquid Electricity Cube at Fort Bliss, Texas.”
Along with dozens of other examples of communities and companies who are using these “cubes”…
“And California has gone even further…
“Passing a law that requires a version of this protective technology on every home built after January 1st, 2020.”
There’s a lot of chatter about how this is a “security” initiative, related to “microgrids” as we try to protect electricity distribution from cyber or terrorist attacks.
So yes, this is all about energy storage and perhaps distributed energy generation — providing local energy that’s independent of the power grid, just like hospitals or other sensitive facilities have always done with big generators or batteries.
The technology has been improving, there are both fuel cell and battery options to complement older natural gas and diesel generators, and, yes, part of the reason for investing in this distributed storage of energy is because of the well-known fact that our electrical grid is in many ways outdated and at risk of cyberattack or sabotage, as well as simple natural failure from a few failed high-voltage lines or power plants in the wrong place at the wrong time.
And, of course, the other great motivator on the storage side is renewable energy — reasonably priced and better-performing batteries can make solar or wind power more competitive with baseline fossil-fuel or nuclear power.
So what’s Forest actually telling us to buy as a way to get our mitts on some cash from this trend?
Here’s a little more from the ad:
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“So how would a ‘Liquid Electricity Cube’ protect your neighborhood from a grid attack?
“Suppose it’s January and old Jack Frost is out for blood. Temperatures dip below zero.
“Then a cyber-attack hits the grid.
“Instead of you turning into a human popsicle…
“The Liquid Electricity Cube in your neighborhood instantly kicks in.
“Transmitting wattage to your community until crews can restore the grid.
“And if specialists can’t seem to figure out how to untangle it for days?
“There would be a warehouse full of containers that store electricity in
the form of a liquid.
“Hence, why some call it ‘liquid electricity.’
“It could be weeks’ worth of energy.
“And they could simply circulate this liquid through the cube to feed power to the community… “
And then we get into the actual story… he says this liquid is a vanadium electrolyte, and the pitch about these “Liquid Electricity Cubes” is really about vanadium flow batteries, which have been around for a few decades but are getting more attention as they improve (they’re far safer and more long-lived than lithium ion batteries, for example, there’s a good article on them fro IEEE here).
So it looks like we’ve probably got a pitch about a vanadium mining stock. That is the core strategy behind so many newsletters that focus on junior mining, after all, identify a growing market for a relatively minor metal and then try to identify the stocks, often exploration-stage “junior” companies, who might be most levered to a mania emerging for that metal that drives prices rapidly higher.
The general idea has worked many times for uranium, rare earth metals, lithium and cobalt for batteries… you name the metal, there’s probably been a mini-bubble in it at some point over the past 20 years. It is always a high-risk bet, though, both because the mania might not emerge and you might not time it properly, and because you’re typically picking companies that are highly promotional, often managed by the charlatans who always seem to find homes in the mining industry, and in need of massive financing, so they will probably perform shockingly badly if the mania doesn’t emerge or they don’t report some exciting drilling or production results.
So then we get into the actual pitch…
“How do YOU get rich from this?
“The first thing to understand is that…
“Vanadium stocks are the key to the motherlode.
“That’s because vanadium is the magic metal that makes these cubes work….
“On a percentage basis, you have a greater exposure to profit increases from miners than you would buying the metal.”
That’s certainly true, on average — in a bull market for a commodity, a miner’s profit per ounce or per pound can go up dramatically (mostly just because operating costs don’t usually change as quickly as the selling price… though that’s true in a bear market, too, which is why mines get shut down and miners declare bankruptcy when prices drop and make marginally profitable mines suddenly unprofitable).
So what’s up with that executive order? What does that have to do with anything?
“Now, vanadium has another tailwind behind it.
“And this is why many early investors stand to get rich.
“That tailwind is the United States government…
“You see, America doesn’t produce vanadium today.
“We have to import it.
“And since it’s vital for our high-tech economy…
“And for national security objectives…
“President Trump issued Executive Order 13817. A goal of which is to get American production online.”
And he says vanadium is already shooting higher…
“The momentum is already there.
“Right now, the price of vanadium is at a 13-year high, due to lagging production.
“Over the last two years, you could have made more money from vanadium than the next four biggest metals.”
Well, the ad is dated March, 2019, but apparently they didn’t bother to do any recent checking — vanadium did go on a historic tear last year, more than doubling just from April to October, but it fell just as fast — the metal price is now below where it was a year ago, though yes, many vanadium producers are a little baffled by this because they say they see no end of demand increases, both for high-purity vanadium for batteries and, on a larger scale, from Chinese demand for vanadium to meet their new steel-strengthening guidelines (supply, of course, is a little more uncertain and is, to some degree, controlled by China’s secondary supply of lower-quality vanadium).
And we’re told that some of the vanadium stocks are already soaring, though this data is generally a bit old as well, with profit peaks four or five months ago when vanadium was near its highs:
“And like sharks smelling blood, billionaires have moved into this space.
“Some of them include…
“Billionaire fund manager, Leon Cooperman. He told CNBC that he believes vanadium is a lucrative long-term play. Soon after he uttered those words, the price of vanadium spiked 50 percent.
“Then there’s Robert Friedland, a famous billionaire miner. He told reporters, “We think there’s a revolution coming in vanadium [Liquid Electricity Cubes].”
“Another billionaire investor positioned for mega profits is Vladimir Lorich. His firm made a killing on cobalt. Now he’s claiming this space is set to grow more than Bloomberg’s 6,500% projection.
“Over the past 12 months, we’ve seen some vanadium stocks take off.”
He mentions Bushveld in South Africa and Largo Resources (the latter of which was the stock Leon Cooperman talked up last year, and which I also own), but says that these aren’t the stocks he has in mind… so what stocks does he think we should buy?
“The life-changing money is going to be in three companies that are starting to mine for American vanadium.”
If I had a nickel for every time a company was touted because it was going to provide a secure American-mined supply of a critical resource (cobalt, lithium, rare earths, you name it), I’d have… well, I don’t know, a lot of nickels. A lot more nickels than I’d have if I actually bought stock in those companies, since pretty much every one eventually withered on the vine, though sometimes they’ve had nice bubbly spikes first.
Forest also notes that vanadium demand is driven by steel demand, which means it’s largely driven by infrastructure projects (vanadium is used in very small amounts to strengthen steel — the big driver last year was China’s decision to require a higher vanadium content in its rebar to help with earthquake resistance, catching their standards up with those used in many other places), so skyscrapers and rail lines and big infrastructure projects are all important for vanadium demand — which is why China’s economic growth in general is such a driver for vanadium prices, just like it is for iron ore and copper.
So which miners does Forest like?
“The best option is to pull vanadium from shale.
“And that’s what these three American vanadium miners do.
“The first company I’m recommending has claim to 1,140 acres near Carlin, Nevada.
“This is an area that’s generated some of the largest mining winners in U.S. history.”
Being in Nevada does make permitting a bit easier… what other clues do we get about this one?
“127 holes have been drilled on their claim — that proves it’s a high-grade vanadium deposit.
“Even more promising is that of the vanadium locked in the shale they mine…
“They’re able to extract 83% of it. That’s considered very impressive in this industry.
“Because of that, this company could see an additional $630 million in operating profits during their first decade of operation. That’s 17 times the size of the market cap of this miner….
“This miner has $2.8 million sitting in the bank. It’s enough for two years’ worth of operations. Plus, through a financing tool called warrants, they have $8.6 million sitting on the sidelines.”
OK, so that’s a super-tiny company — that would mean it’s somewhere in the $35 million neighborhood, which probably means it is a very early stage explorer… that $2.8 million might get them through a couple years of operations, but “operations” would be just “doing a little more drilling and making the rounds of investment conferences”. They are presumably at least 5-10 years and at least a few hundred million dollars in fundraising from actually possibly someday maybe producing vanadium.
But that’s not so unusual for a junior mining stock, of course, it’s just important to re-mention when we’re writing about these kinds of highly speculative stocks to a wider audience. So which one is it?
This, dear friends, is good ol’ Cornerstone Metals, which recently renamed itself First Vanadium Corp (FVAN on the Venture Exchange in Canada, FVANF OTC in the US) — we’ll probably see a lot of this, a hot market for a particular metal always causes junior miners to change their names to attract investor enthusiasm. They no longer have $2.8 million, that’s now down to $1.6 million — though the $2.8 million number did match last fall, before they changed their name. And they have made some recent progress on their Carlin Vanadium Project, releasing their first resource estimate based on recent drilling that guesses (“indicated and inferred”) they’ll have a few hundred million pounds of Vanadium Pentoxide (V205). That’s all in their latest investor presentation here if you’d like to read some more.
They say they are fast-tracking the project to “Complete Economic Study” in the fourth quarter of this year, which should mean a preliminary economic analysis (PEA), which would be notable and might help them get some more attention, and they may even book some reserves before too long (Here’s how I understand the difference: “Reserves” means you’ve made some assessment that the metal is there and that it’s possible to extract it profitably using some rational economic plan, “Resources” just means you’ve identified the metal and can estimate how much is there).
Greg McCoach, who’s been putting out a mining newsletter for a long time (though we haven’t covered it recently) had an interview with First Vanadium’s CEO Paul Cowley in which he said to expect the PEA by the fall, so we’ll see. Here’s that interview if you’re curious:
That news of their resource estimate came right at the end of February, and did cause First Vanadium to spike in price… though it gave that spike up again right away, and the shares are right around where they were before the news. The appeal of the project, I guess, is that it’s relatively high grade and large compared to other US projects, though it wouldn’t make much of dent in terms of the global market, and that it’s been relatively inexpensive to explore thus far (apparently it’s a shallow deposit), though until the economic assessment comes out it’s anyone’s guess what it might cost to build and operate the mine, and, of course, we don’t know what the vanadium price is going to do in the next six months.
What about the other stocks? Here are our clues:
“This next company also has a vanadium mine in Nevada.
“It’s a pure vanadium play. And out of the shale in their deposit, they’re able to extract 86 percent of the vanadium present. Plus, their current data suggests their vanadium deposit may be bigger than previous geological testing first showed.
“The CEO is considered a legend in the junior mining industry. This company is lucky to have him. He’s a serial entrepreneur, geochemist, and geologist with over 30 years’ experience in this industry….
“As CEO of Potash One, he oversaw the friendly takeover of his company for $434 million. And he ran Energy Metals Corp, a uranium company, growing it from $10 million to $1.8 billion.
“That’s a 17,900% growth spurt.
“When you consider the demand for vanadium in liquid electricity and steel… plus the current global shortage…
“It’s the perfect set up…
“To make as much as 10 times your money over the next 12 months.”
That one is Victory Metals (VMX.V, VKMTF), a company that was recently created (from a private placement and fundraising based on the ashes of Ripper Oil and Gas, a shell company) and bought the Iron Point Vanadium Project from a private company (Casino Gold). That “serial entrepreneur” is Paul Matysek, who is not technically the CEO (he’s Executive Chairman) but is the highest-profile person at the company… he also chairs First Cobalt (FCC.V, FTSSF), and seems to always be where the metals hype is flowing.
You can see their latest investor presentation here. Presumably the goal is to drive the price up and get acquired, since that seems to be what Paul Matysek tends to do, but I have no idea whether or not they’ll be successful — it’s certainly an extremely early-stage project, if you want some skepticism on it you need go no further than IKN.
Market cap is about C$60 million at the moment, relatively unchanged since they started trading a couple months ago, which seems comparably rich next to First Vanadium, since Victory Point doesn’t have even any drilling results yet, but it will presumably not be real fundamentals that drive either of these over the next few months — either there will be another hype cycle for vanadium stocks, led by rising vanadium prices and newsletters and pundits, or there won’t, and both First Vanadium and Victory Metals seem to realize that self-promotion is a key part of their job as junior explorers.
How about number three?
“You’ll also get a third pure vanadium play. This miner has the largest property of all North American vanadium miners. It’s four times bigger than the next vanadium miner. As such, it could run its smaller competitors out of business.
“With everything happening in vanadium right now, this could be another 10-bagger for you.”
That’s not enough of a clue to give a 100% certain match, but the most likely answer here is Prophecy Development (PCY.TO, PRPCF) owner of the Gibellini vanadium project in Nevada. Prophecy is a substantially smaller company than Victory or First Vanadium at the moment, with a market cap of about C$20 million, but it is also much further along in the development process, with a preliminary economic assessment released over a year ago — their latest investor presentation is here.
I speculated on Prophecy last year as part of the vanadium mania, though stopped out of it pretty quickly when prices dropped (and lost money). Like many juniors who hope to build a mine, it looks pretty appealing on paper if you have confidence in the long-term vanadium price (break even is around $7/lb, well below the current price), and the PEA gives the project a net present value in the $300 million neighborhood, which always sounds appealing for a teensy $20 million company… but, of course, they first have to finalize the reserves and make a better plan and raise the $100+ million required to build a mine, and who knows whether bankers will end up trusting last fall’s spike in the vanadium price.
Next step is a feasibility study to show to the bankers, which they hope to have complete by late this year, though they are also continuing exploratory drilling and planning for the beginning of permitting — they have a timeline in their presentation indicating that construction could begin late in 2020 and production late in 2021, which is probably wildly ambitious (that’s a pretty safe assessment for any mining project presentation) but is, at least, a few steps further along than the other US juniors.
I would be a little surprised if anyone opens a meaningful new vanadium mine in the US in the next five years, but that doesn’t mean it’s impossible… and, more importantly, that doesn’t mean there won’t be another mania among the “vanadium juniors” at some point that drives the stocks higher. Just don’t start to take them seriously as real businesses just yet, these look like highly speculative and promotion-driven companies that are trying very hard to impress investors with both the broader vanadium story (rebar/batteries) and their US/strategic connection — none of them will get anywhere near building a mine without first raising vast amounts of capital, so their currently negligible market capitalization is just the tail of the future dog… whether or not it’s wagging probably doesn’t mean much yet.
If you want some more “color” on who some of the players are, and the story behind these stocks, just check out this panel presentation from a Cambridge House conference earlier in the year:
That presentation also pulls in a couple other names you can consider looking at — Prophecy and First Vanadium are represented, but also Western Uranium and Vanadium (WUC.CX, WSTRF), another tiny junior trying to develop some long-known vanadium projects, which were often found by uranium miners, and Energy Fuels (UUUU, EFR.TO), which is much larger than the others and is already producing some vanadium (though it’s primarily dependent on uranium, which has hurt in recent years).
Vanadium batteries are not going to drive the vanadium market in the near future… the vast majority of production will still be going into steel, though some miners are focusing on higher purity “battery grade” vanadium, which does indeed garner higher prices and could make a difference at some point in the next few years. Given the price spike we saw with last year’s Chinese rebar regulatory changes, though, it’s probably extra important to be wary of placing big bets on where the price will be in six months or a year.
That’s just my take, though, and I’m not a mining expert and have personally not made money on vanadium (I did recently invest a little more in Largo Resources, which is a real low-cost miner and a much larger company but will never be as sexy as the juniors — and so far that has not been a profitable investment), so I’ll turn it over to you, dear friends… have a vanadium favorite? Think Forest has the best three picks here? Have a better match than I’ve proposed for number three? See a bright or hazy future for this unusual metal? Let us know with a comment below.