20. August 2021 | 13:36 CET
Standard Lithium, Aztec Minerals, Orocobre - Take advantage of trading opportunities!
Raw materials are a prerequisite for any kind of production. The more there is produced, the more raw materials are needed. Precious metals are also suitable as an investment. Historically, they are always in demand when inflation rises. Commodity prices are thus subject to many factors. Some of which can neutralize each other, and some of which can reinforce each other. For example, the persistently high inflation of over 5% in the USA speaks for an increasing flight of investors into precious metals and, thus, rising commodity prices. While at the same time, the semiconductor crisis, which is currently occurring, is causing production cutbacks and idle assembly lines. That means that fewer raw materials are needed, which in turn puts pressure on prices. What is the best strategy now and which share has the greatest potential?
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ISIN: STANDARD LITHIUM LTD | CA8536061010 , AZTEC MINERALS CORP. | CA0548271000 , OROCOBRE LTD | AU000000ORE0
"[...] Our projects are at the initial, high reward exploration stage. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
Standard Lithium Ltd. - Price roller coaster
A good example of the mixed opinion of investors on commodity price development is the share price performance of the Canadian Company Standard Lithium. Investors currently seem to be uncertain that the demand for lithium will decrease due to factors such as the chip crisis and falling demand for battery-powered end devices (laptops, etc.). In addition, the (temporary) loss of one of the largest mining areas for lithium in Afghanistan is a burden. On the other hand, the lithium price is likely to rise due to the high demand in the wake of the energy and mobility transition.
The share price fluctuated very strongly in the last few days. From a level of around CAD 10, the stock dropped to CAD 7.40 in a few days. It is now trading at just under CAD 9, around 15% below its all-time high. It should not be forgotten that Standard Lithium is currently not yet extracting lithium from the ground. Instead, the Company is working on its first demonstration plant in the US state of Arkansas. Here, its proprietary LiSTR technology will extract lithium directly from brine without the need for water evaporation. Both from a technical point of view and for dealing with the capital markets, the Company recently secured the expertise of ex-BASF manager Dr. Volker Berl.
As the semiconductor crisis comes to an end, demand for lithium should also pick up strongly again. Although research is currently being conducted into alternative battery concepts (solid-state accumulators, etc.), lithium will remain the most important raw material for producing efficient energy storage systems in the foreseeable future.
Aztec Minerals - Phase 2 of the drilling program starts in Q4
Canadian junior explorer Aztec Minerals recently announced exciting news. The Vancouver-based company is committed to discovering large, polymetallic mineral deposits in the Americas. The Canadians have reported successful results from the first phase of the surface exploration program for its Cervantes core asset in Sonora, Mexico, which targets prospective porphyry gold-copper deposits. The project, which is operated as a joint venture with Kootenay Silver Inc. (Aztec's share: 65%), is located near the operating mines of Alamos Gold and Agnico Eagle.
The Company announced that additional gold-copper-molybdenum soil and rock geochemical anomalies have been discovered in the Estrella, Brazil, California Norte and Estrella Norte areas. In addition, grades of up to 21.3 g/t gold have been found in various rock chip samples. Based on these results, the JV partners have announced the implementation of a Phase 2 RC (reverse circulation) drilling program. The drill program of up to 5,000m is expected to commence in the fourth quarter of 2021. In doing so, the JV partners will immediately begin the process of securing financing.
Having already announced the successful completion of its 20-hole drill program at its historic Tombstone property in Arizona in July, this new campaign could bring the Company a good deal closer to its goal of becoming an exciting acquisition candidate for a major player.
Orocobre Limited - Merger will now be implemented
The Australian Orocobre Limited, headquartered in Brisbane, is another company that is struggling, albeit to a much lesser extent, with investors' uncertainty regarding the price development for the raw material lithium. While the share price reached a new all-time high of AUD 9.97 just under a week ago, it has fallen back somewhat in recent days. And this despite positive news.
Thus, the Company, one of the world's most important lithium producers, received the green light last Friday for its merger plans with Galaxy Resources, which were already published in April. Already at the close of trading on Monday, the share swap began for their shareholders. For each Galaxy share, there are 0.569 share certificates of Orocobre. The exchange is expected to be completed on August 25. On that day, Orocobre also plans to publish its financial results for fiscal 2020/2021, which ended June 30. Regular trading in the new Orocobre shares will then begin on August 26. Analysts are formulating price targets for the stock of up to AUD 11.00.
Lithium shares are currently under pressure. At the same time, the long-term scenario should not have changed. For the foreseeable future, lithium will remain one of the most important raw materials for the energy transition and electromobility. Therefore, an investment in an established producer like Orocobre should be associated with low risk. More speculative are the shares of Standard Lithium. The best risk-reward profile is certainly the share of Aztec Minerals. The Company has good projects and excellent results and is a potential takeover target with a market capitalization of about CAD 17 million.