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Could this Lithium IPO Become the Next Galaxy Resources?

Could this Lithium IPO Become the Next Galaxy Resources?
Much of the global lithium supply comes from Chile, Argentina and Australia, but one of the most promising regions in the US is Nevada, which hosts America’s only operating lithium mine, Silver Peak.
Feb 21, 2017 By Simon Herrmann Tags: IPO, LI3

Lithium is a key ingredient in batteries to store solar power and to drive electric cars. Demand for lithium is increasing dramatically worldwide thanks to companies like Tesla which recently commenced construction of a lithium battery ‘Gigafactory’ outside the city of Sparks, Nevada. It is projected to produce more lithium ion batteries in 2018 than the entire world has produced in 2013.

Much of the global lithium supply comes from Chile, Argentina and Australia, but one of the most promising regions in the US is Nevada, which hosts America’s only operating lithium mine, Silver Peak.

An Australian mineral exploration company has acquired more than 100sq km not far from this mine and is now raising capital to systematically explore these assets. Could this company become the next Galaxy Resources, the West Australian-based lithium producer that was one of the best-performing ASX stocks in 2016?

Lithium Consolidated Mineral Exploration Limited, or LCME, seeks to raise between $5m and $8m to list on the ASX in March. Over 50 per cent of the funds will be used for drilling, predominantly in in the 80 per cent owned Tonopah Lithium Project in the Big Smokey Valley, Nevada.

Near-term drilling activities are designed to demonstrate the commercial potential of the company’s Nevada assets and any significant discovery would validate LCME’s exploration strategy. Located close to a mine that has been producing lithium for over 40 years, the location appears strategically favourable but a maiden resource estimate is required to confirm the grade and scale of the deposit.

As new supply is coming slow to market, lithium prices have experienced a ‘price boom’ and there is a risk that this could represent a cyclical peak. However, LCME is looking to take advantage of this ‘hot sector’ and exploration success will be the primary value driver for this IPO.

ASX Code: LI3
Shares on Offer: 25m - 40m
Listing Price: $0.20
Market Capitalisation: $17.7m - $20.7m
Listing Date: March 17

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Simon Herrmann Author: Simon Herrmann Feb 21, 2017

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.


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