When it comes to one particular investment, I’m not hiding my feelings. Quite the opposite, in fact – I’m shouting about this one from the rooftops.
It’s a commodity in greater and greater demand, and only a handful of big producers serve the entire market. If we find the right investments, I think we could stand to make some serious money.
If you’ve been keeping up with recent Right Sides, you’ll know that I’m talking about lithium, the metal needed for everything from smartphones to electric cars.
Recently, I showed you one way to invest in this story: London-listed investment company Rare Earth Minerals (AIM: REM).
It’s a highly speculative investment, as I said at the time. Investing in mining pioneers always has something of a lottery feel to it – that’s part of the fun.
And when lotteries go well, they go extremely well. Within two weeks of my writing about the stock, REM’s share price had doubled! Great news if you got in on time.
Today, I’m going to provide an update on this stock, which remains my favoured lithium mining play. I’m going to remind you why its Mexican interest is the most exciting project I’ve ever seen.
I’m also going to talk about another company. It’s the miner at the coalface of that very project, and has recently announced an intention to list in London. I think we should be watching it closely.
Take a look with me.
Money in the bank
Before we dive into all that good stuff, I feel that I should update you on REM’s financial situation.
There is some significant fundraising news to report. Since funding is absolutely key for a small investment company like this, it’s important that we take a look.
Back on 23 May, the company announced it received over £3m from an American investment group called Yorkville Advisors.
Well, it seems Yorkville can’t get enough. Just last week, REM announced that Yorkville has offered another $10m facility.
At 10%, the interest rate seems high at first glance. But this is a debt funding, not a significant equity release. These sorts of deals can be extremely tricky in this space.
Yorkville is a specialist investor in the resources and alternative sector. If they’re offering this sort of funding to what is, after all, a £50m market cap player on the Aim market in London, then I think you and I can take heart.
The truth is this: the mining industry is a tough place to be right now. Industry-wide fears of a global slowdown (read China) mean that investment capital is extremely hard to find.
Despite that, REM has proved an attractive draw.
That’s down to its exciting projects around the world. If you’re not familiar with them, here’s a quick run-down.
REM around the world
One of the best things about REM is that it’s an investment company, not a miner. It holds various interests in mining projects across the globe.
There’s been news on three key projects over the last few weeks:
In Greenland, REM has hired geological consultant SRK to survey and identify areas of South Greenland where REM holds concessions. Initial results show that there are rare earth and gold targets that need looking at further.
This is very early stage stuff, of course. Whether anything is found, whether it’s recoverable at an economic cost is extremely hard to say. And even if there is, there’ll be plenty more work to do down the line.
I’m not getting too excited about this one for the moment. The initial works look promising, but time will tell.
Meanwhile in Australia, REM holds a “free carry interest” (where they don’t have to pay towards the initial drill programme) in Yangibana Rare Earth Prospect. An update released a couple of days ago makes for interesting reading, even if you’re not familiar with all the rare earth jargon:
“REM is delighted with the results of the first phase of drilling… the overall grades of rare earth oxides are deemed highly promising and we are particularly pleased with the high levels of Neodymium Oxides…”
“REM looks forward to reporting further significant progress from Yangibana over the coming weeks as all the drilling results are made available and then the launch of the second phase exploration programme.”
Again, this is an early stage project. If there’s an economic case to extract the rare earths found then, as exciting as that may be, there’ll be plenty more money to raise and work to do.
But the projects in Greenland and Australia are really just icing on the cake for REM.
The cake itself is its share of the lithium project in the Sonora region of Mexico.
Mexico: the cake
Now, like I say, REM is an investment company. It doesn’t physically get involved at the coal face. In the case of this Mexican mine, the company at the coalface is Canadian-listed Bacanora Minerals.
REM owns over 11% of Bacanora, as well as direct interests in several of Bacanora’s mining concessions.
Over the last three weeks, Bacanora has itself come out with a string of fantastic news releases. It seems like the more drilling they do, the more lithium they find.
Already this resource looks like a world-class deposit, and there’s still loads more acreage to discover. And that’s not all….
Bacanora has even announced its intention to list shares on the London market too.
The detail is too much to report right now. So next week, I’ll write a dedicated Right Side about what’s going on in Mexico, why I think Bacanora is seeking a dual-listing for its stock and exactly what the latest (and might I add, fantastic) drill results mean for investors.