The market is demonstrating interesting appetite and risk aversion for certain lithium exploration companies with limited material change in underlying business characteristics.
By Dave Brown – Exclusive to Lithium Investing NewsFirst Lithium (TSXV:MCI), a junior mineral exploration company with properties in Ontario, Manitoba, Alberta, Yukon and Nevada disclosed the completion of a drill program at Mollie River in Northern Ontario. The company reported deepening an existing hole to access a wider zone of gold and copper mineralization. The hole was re-entered and deepened to 293 meters and the 47 samples collected from this new drill core were assayed for gold, copper and nickel. Results did not meet the company’s expectations and it currently plans no activity on the tested claims; however, it will evaluate the merits of further exploring a non-contiguous claim which lies 2 km to the west, toward Trelawney Mining and Exploration Inc.’s (TSXV:TRR) Chester Gold Complex. The primary focus for the company is currently lithium exploration and development potential in Manitoba, Alberta and Nevada.
The market has strangely demonstrated accelerated demand sending share price almost 240 percent higher before reverting to current valuation of 23 cents from its previous close of 9 cents since the news of this development. The high volatility is also corresponding with increased trading volumes.
Lithium Exploration Group (OTC:LEXG), an Arizona based company with properties in Western Canada and Argentina, has seen its stock price rise in dramatic fashion; however, one analyst suggests the dynamic progress appears to be the byproduct of “little more than a $3.3 million promotion campaign.” From between March 18 and April 28, the share prices soared from 7 cents to a 52-week high of $10.68. Even after last month’s correction, Lithium Exploration is still trading at $2.40, giving the company a market cap of about $110 million based on over 47 million shares outstanding.
Battery manufacturer reporting loss
On Monday, Ener1 (NASDAQ:HEV) reported its earnings for the first quarter of 2011 with total consolidated revenue at $23.1 million, an increase of 110 percent over the first quarter of last year. Primarily due to an impairment charge, the company reported a net loss of $84.7 million posting a loss of 51 cents a share, compared with market expectations of a loss of 7 cents a share.
Ener1 was inhibited by an exceptional charge related to the write-down of its investment in Norway-based electric car maker Think Holdings AS and a $13.9 million loss on financial instruments. Theodore O’Neill, Alternative Energy Analyst at Wunderlich Securities downgraded the stock and cut its price target saying Ener1 had written off its investment in its only major automotive customer, was effectively out of cash, and would need to raise fresh capital in a private round. In a note to clients, Mr. O’Neill suggests “Ener1 had all its automotive eggs in one basket and it dropped the basket. It was a major owner of Think Global and the only large scale automotive customer.” Shares of the New York-based company were down 17 percent at $2.04 with relatively large quantities of shares being transacted on Wednesday morning.
Ener1 Chairman and CEO Charles Gassenheimer remained positive about the earnings in a statement, “We believe our first-quarter results represent another step forward in building a profitable business. We took definitive steps on the path toward achieving our goal of being EBITDA positive. More importantly, we have laid a strong foundation within our grid energy storage business, and we anticipate rapid revenue growth in the second half of 2011.”
The company is engaged in the business of designing, developing and manufacturing rechargeable lithium-ion batteries and battery systems for energy storage. Ener1 has three operational segments: battery, fuel cell and nanotechnology; and its end markets include transportation, stationary power (energy storage for utilities and renewable energy, including wind and solar power in addition to battery backup systems for the home), military applications and small cell markets. In the transportation markets, Ener1 is focused on developing systems to power the next generation of hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs) and electric vehicles (EVs). This technology is also developed for other transportation markets, including buses and trucks, as well as alternative transportation vehicles. The company also conducts research on and develops fuel cells and nano coating processes.