Is Patriot Battery Metals the next billion $ Lithium company?

all dollar amounts in US$

Patriot Battery Metals [PMET] (TSX: PMET) / (OTCQB: PMETF) is an early-stage hard rock Lithium (“Li”) explorer in the James Bay region of Quebec, Canada. It has a fully-diluted Enterprise Value [EV] {market cap + debt – cash} of ~$608M.

I’m tracking ~75 Canadian & Australian-listed companies that have Li properties/projects in Canada. In terms of drill results, PMET stands head & shoulders above its peers.

Despite being one of the best performing Li stocks on the planet, for the reasons that follow, PMET’s fundamental valuation is still attractive. However, some investors fear a correction is inevitable as PMET shares are up 758% in the past six months.

While I don’t know where PMET’s share price is headed in the near-term, the trajectory of drill results on PMET’s 21,400 hectare Corvette property points decisively to a monster project. In looking at recent drill results from hard rock Li projects, PMET stands out on BOTH interval widths AND Li oxide (Li20) grades.

A few weeks ago PMET announced its best drill intercept ever; 159.7 meters @ 1.65% Li20. Multiplying width x grade {159.7 x 1.65) yields a value, [263.5], that can be compared to other company’s results. PMET’s recent drill result is 5x better than the peer average.

Astute readers are no doubt wondering if PMET’s tremendous drill results are already reflected in the $608M valuation… That, of course, is the $64,000 question. Here are eight reasons to consider buying PMET even after its massive share price gains.

8: Dual-listing in Canada & Australia. Australian investors LOVE Li juniors. As is the case in Canada, there are some very experienced, well-respected brokerage houses & investment groups down under.

Some of the most exciting Li plays on the planet are domiciled in Australia; Pilbara Minerals, Sayona Mining, Liontown, Core Lithium, Piedmont Lithium — and soon — Patriot Battery Metals.

7. World-class scale — if Corvette grows into a multi-hundred-million tonne colossus, it would be big enough to move the needle for companies like Glencore, BHP & Teck Resources. Glencore has a strong foothold in other battery metals, producing cobalt, nickel & copper, it’s reportedly looking at Li for its commodities trading business.

In this chart one can see that if there are 300 million tonnes booked at Corvette (say in 2-3 years) at a grade of 1,20% Li2O, that would be 8.9M tonnes of Lithium Carbonate Equiv. (“LCE”).

By comparison, Pilbara clocks in at ~8.7 million tonnes of LCE. 8.9M tonnes of LCE valued at $250/tonne would equate to an indicative level of $12.04 per share, assuming 140M fully-diluted shares. 

6: Very strong interest from strategics & acquirers {see chart below}. NOTE: Ganfeng Lithium, Mineral Resources ltd., Allkem, Livent, Piedmont Lithium, Sayona & Lithium Americas already have investments in Canada, mostly in Quebec. Not that management wants or needs a partner anytime soon, not at today’s valuation.

Exploration capital is readily available. In fact on September 15th, PMET announced the issuance of 1.51M shares at a huge premium to market. Assuming deep-in-the-money stock options & warrants are exercised, pro forma for the announced capital raise, the Company has ~$42M in cash.

5: PMET’s project is in the world-class mining jurisdiction of Quebec, Canada, a province with one of the greenest power footprints in the world. More than 90% of electricity generation comes from hydropower.

It’s ranked #6 of 84 global mining jurisdictions in the latest Fraser Institute Annual Survey of Mining Companies. The Province is famous for local institutions, investment Funds & gov’t agencies helping to finance projects via loans, equity, cash grants & tax breaks.

Importantly, Quebec is becoming a globally-significant, EV/battery manufacturing hub. Tesla is increasingly expected to announce plans to enter Quebec.

For clear geopolitical reasons, “the West” can no longer rely so heavily on China for critical components of the EV supply chain. Quebec offers logistically simple, low-cost, secure & rapid rail or truck delivery into most U.S. & Canadian cities.

Key Li assets in Quebec — Patriot’s Corvette, Nemaska’s Whabouchi, Allkem’s James Bay, Critical Element’s Rose, Sayona Quebec’s (75%) / Piedmont’s (25%) North American Lithium and Sayona’s Authier projects are very likely to become mines.

4: Potential to fast-track & de-risk the Company via production of a 6%+ Li20 spodumene concentrate. With Li demand so incredibly strong, PMET plans to fast-track Corvette into production in as little as 3 or 4 years.

Producing Li2O spodumene concentrate instead of upgrading material all the way to Li hydroxide is a lower-risk way to pull forward production by years & save $100’s of millions in cap-ex. Upfront payments from future off-take agreements could help fund construction. Why fast-track this asset? Li is simply the hottest investible commodity in the world.

The following forecast &.this linked commentary from industry-leading consultant Joe Lowry of Global Lithium LLC is quite amazing. His base case scenario is for prices to be higher than today’s all-time high…. in 2027! What other commodity has this kind of outlook?

3: Some of the best drill results, anywhere in the world, a Li2O grade of 4.12% (over 9 meters) and 6.74%!! (over 1.15 m). In my view even better results could be coming as the Company has drilled fewer than 80 holes. Dozens of assays are pending. To frame what 1.00% Li2O looks like in a raging bull market for Li chemicals, let’s compare it to a gold.

1.00% Li2O = 2.473% LCE. SQM recently received $54k/tonne for Li carbonate. 2.473% of $54k = $1,344 rock, which equates to 25 g/t gold!

2:Very substantial exploration upside; one can’t rule out 300 million tonnes of mineralization at Corvette as the team has only meaningfully drilled one of six prospective spodumene pegmatite clusters. Red Cloud’s David Talbot is estimating ~170M tonnes (on just the CV5-1 spodumene pegmatite corridor). To be fair, other clusters have shorter strike lengths and may prove less prolific.

Since the deposit is open in both directions at CV5-1 it’s reasonable to imagine strike length there might extend hundred(s) of meters east & west. And, management believes the deposit(s) could reach well beyond 225 meters in depth.

A quote from Ken Bridsden is telling, “Remaining open to the east, west and to depth, and in addition to numerous other lithium pegmatite targets, the Corvette Project remains highly prospective beyond what we have found to date. Corvette is one of the world’s great lithium raw materials discoveries...”

Notice he said “one of the world’s” (not just one of Canada’s) great discoveries, which directly ties Corvette to western Australia’s giant mines like Greenbushes (360M tonnes @ 1.50%) & Pilbara’s Pilgangoora (309M tonnes @ 1.14%).

1: Strong mgmt. team, board & advisers. Most Li juniors have 1 or 2 impressive execs., PMET has five. CEO/Pres./Dir. Blair Way, B.Sc., MBA has > 30 years’ experience in Australasia, Canada, the U.S. & Europe, working on gold, copper, nickel, zinc, magnesium, graphite, cobalt & Li projects.

Mr. Way has worked for large & small companies including BHP & Oceana Gold. For five years Mr. Way was CEO of a graphite junior where he gained critical insights into the Li-ion battery space.

Blair holds a Bachelor of Science (Geology) from Acadia University in Nova Scotia, a MBA from the Univ. of Queensland, Australia, and is a Fellow of the Australasian Institute of Mining & Metallurgy.

Ken Bridsden is the former CEO of Pilbara Minerals. He joined as non-exec. Chairman last month. Pilbara is perhaps the best success story in the Li sector this decade, up ~2,900% from its March 2020 COVID-19 low, to an EV of ~$9.2 billion.

Bridsden was CEO [from early 2016 to Aug. 2022], a period spanning everything from exploration to highly efficient commercial operations.

VP of Exploration Darren L. Smith, M.Sc., P.Geo has > 16 years’ experience specializing in high-level project management including program design & implementation, technical reporting, land management, community engagement & corp. disclosure. He has provided technical oversight for PEA, PFS & BFS/DFS-level projects & complex metallurgical programs. ​

Darren is well-versed in carbonate complexes & associated metals. In 2009 Darren & his team discovered one of the world’s largest REE deposits (Ashram) and has been instrumental in its development.

Newly appointed Brett Grosvenor (lead member of steering group reporting to the board) has > 25 years’ experience in the development & delivery of minerals processing, energy & infrastructure projects in Australia, Asia, Europe, and N. + S. America.

Brett was heavily involved in notable Li projects including Greenbushes (Tianqi/IGO Ltd./Albemarle), Pilgangoora (Pilbara) & James Bay (Allkem). As a Director at Primero Group in Australia, he was instrumental in the strategic positioning of Primero as one of the world’s premier Li mineral processing & engineering groups.

CFO Dusan Berka, M.Sc., P. Eng. has 50 years’ experience in N. America & Europe with expertise in corporate governance, financing, marketing & administration, corporate communication, public relations & contract negotiations.

He has served in senior roles of companies traded on the TSX, TSX-V, CSE & NASDAQ. Mr. Berka is a graduate engineer with a M.Sc. (Dipl. Ing.) degree from Slovak Tech. Univ., Bratislava, Slovakia (1968) and a member of the Engineers & Geoscientists of B.C. since 1977.

Patriot Battery Metals (TSX-V: PMET) / (OTCQB: PMETF) is not without its risks; still years from production, the possibility of delays from various mining project hurdles. However, the benefits articulated above outweigh the risks. It can be difficult to buy a stock that has wildly outperformed its peers, readers are encouraged to take that factor into consideration.

For longer-term investors PMET offers a compelling way to play the ongoing Li market tightness that I believe will last many more years.

Disclosures: Peter Epstein of Epstein Research [ER] has no prior or existing relationship with any company mentioned in the above article. Mr. Epstein owns shares in Patriot Battery Metals.