The Lithium Meeting that Cost Me a Fortune

Whenever I don’t know management, I assume they are “rounders” until proven they are the real deal. [Katusa Research] NOTE: Marin Katusa is publishing a major alert tomorrow morning pre-market. Make sure to read this note to the very end. Dear Reader, Some meetings are over before they begin. And this one in downtown Vancouver certainly looked like one of them. I’d taken a meeting with the founder of a promising new company—one that had the potential to be my fourth successful lithium investment. During my +20 year career, I’ve invested in only three lithium stocks. The first, in 2009, made me more than 2,000%. The second returned over 1,000%, and the third yielded a sweet +200% gain. I was searching for another home run. Lithium prices hit all-time highs in 2022, and whenever a new commodity moves in price quickly, the sector attracts players I call “rounders”. “Rounders” are people in the industry who are always around, but provide little, if any value, to shareholders and extract big salaries from companies. The “rounders pattern” is almost always the same: - Start a company in the new hot sector - Raise a bunch of early seed capital from supporters - Hire geologists to find early-stage projects in “promising” areas (that are often not very good) - Promote the project as “Tesla’s Lithium Lifeline” and sell stock to an unsuspecting public Rounders produce zero lithium. Whenever I don’t know management, I assume they are “rounders” until proven they are the real deal. I always have a quick exit planned before the meeting starts to save my time, in case I get a rounders alert. Leaving this meeting would have been the mistake of a lifetime. My first lithium meeting, in early 2009, had taught me what to look for in a premium lithium company. I’d painstakingly assembled a database of every lithium salar in Chile, Argentina, and Bolivia. Every hard rock deposit in North America. Paul Matysek, a legend in Canadian mining, along with his financiers had invited me over to his house to discuss that research. After two hours of intense conversation, Paul and his backers asked if I wanted to be the CEO of their new company, Lithium One. I had just accepted a promotion at my current employer, so I politely declined—you stick to your word. But I assured them I would write a large check as an investor and help wherever I could. Under Matysek's leadership, Lithium One acquired a number of lithium projects in Argentina and Nevada. And three years after our meeting, Lithium One announced that it had entered into a merger agreement with Galaxy Resources Limited. That success returned a massive 2,440% gain. And made me a believer in heavy profits from the world’s lightest metal. It took seven years, but in 2016 I thought I’d found a new winner: Neo Lithium. Now I’ve seen thousands of mining decks and presentations, and there are three words I hate to read more than anything else when I check to see who’s involved: “Proven Management Team.” The only way you’re proven in my eyes is to make loads of money or a big score for shareholders. And that’s what Neo Lithium had going for it. CEO Waldo Perez had already founded Lithium Americas, which was bought out in 2015. When a successful team goes for round two, I want to know everything about the deal. And I want to see them be more efficient and profitable the second time around. As predicted, the company turned out to be a major score. Neo Lithium got bought out two years ago for more than $700 million. Shortly after the acquisition, I received a late-night phone call… It was my favorite type of call to receive. One that came from a very well-known mining CEO—a paid KRO subscriber—asking what I wanted for Christmas. I was baffled. “…why?” After reading the research report we published in 2016, he invested half a million of his wife’s money in Neo Lithium. She made nearly ten times her money in the buyout because of his purchase—the only one he’d ever made in her account—and she thought her husband was a genius. Which brings me back to my “useless” meeting. No way I was going to ruin a perfectly good track record with this unproven nobody. Then the truth started to come out. Turns out, he’d already ruined my record—just not like I expected. As he continued talking, I recalled an early-stage lithium company that reached out to me in the summer of 2016. They wanted me to participate at a valuation of $12 million. I was busy getting other projects over the finish line for my readers and myself, so I didn’t have the time to do thorough due diligence on the project. I passed. The company was called Millennial Lithium, and it sold last year for about $400 million. I left a very large potential return on the table. And now, across the table from me, sat the former founder and director of Millennial Lithium. I don’t like to make the same mistake twice. Suddenly, this was about to be a very long, very interesting meeting. As we talked, something became crystal clear about “Mr. Lithium”: He is one of the most tenacious operators on the planet. I’ve met a lot of people in this business, but I’ve rarely met someone with such a sense of perseverance. Such an absolute dogged need to win. This guy ain’t no rounder. And just a year after his $400 million buyout, he’s stepping back into the ring for round two. Look, I haven’t put my name on a lithium company in almost seven years. I’ve been waiting like an alligator to publish on the right one. And I think I’ve found it... Not only does the founder have $400 million worth of proven management team on his record, his new company blows everything else in the industry out of the water. First off, the company’s flagship project is based in Nevada—one of the most mining-friendly jurisdictions in the world. The governor of Nevada, Steve Sisolak, sees the state as becoming the hub for lithium production, similar to how Wall Street is to finance or Silicon Valley is to technology. The project is only 3 hours from Tesla’s Gigafactory, so getting lithium to where it’s used is cheap and fast. When Elon Musk said that lithium is “a license to print money,” this is the kind of project he was talking about. Now here’s the kicker: The company’s market cap is a tiny fraction of that single project’s NPV. And they have TWO other projects The second one really has my attention. Located in Peru, it’s estimated to be the sixth largest hard-rock lithium deposit in the world. Let that sink in. And it’s got all the ingredients necessary for strong lithium production: a major highway, a hydropower plant, abundant water access, and a strong local labor force. Again, the numbers are phenomenal: - An IRR of 20% - Expected cash flow of $430M/yr - A 33-year mine life And I haven’t even mentioned the spinout of a third major project JUST announced. So tomorrow morning, before market open, for the first time in almost 7 years… I will publish on the lithium company I believe is quickly becoming the easiest lithium buyout target on the planet. Know that I am fully biased in this opinion. This is as high-risk, high-reward as you will see me publish. You will get the email tomorrow morning at 6 a.m. PST. Make sure you check your inbox then. Regards, Marin Katusa P.S. I’ve seen enough pseudo-lithium companies to know when it’s a rounder. This one’s the real deal. You won’t want to miss it. Copyright © 2023, Katusa Research, All rights reserved. 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