Grid Metals - Lithium in Manitoba
In mid-October I wrote a piece over at motherlodetv.net on Grid Metals (GRDM.V).
When I was writing the piece I was impressed enough with Robin Dunbar’s story that I bought a small, but not tiny, position in the company. The headline is a cashed up company with a highly prospective lithium deposit in Manitoba. We all know the crazy price lithium is commanding in the face of huge EV demand. So the headline might be enough.
However, there is more. A lot more. October 17, Grid announced that it had entered a pre-production agreement with the Tanco Lithium Mine, currently the only North American producer of lithium spodumene concentrate. Tanco will run tests on Grid’s lithium spodumene ore from its Donner Lake Lithium Property. Assuming the tests go as expected, Grid will obtain an Advanced Exploration Permit and Grid will submit a bulk sample to Tanco for testing. If the tests are successful, “Grid and Tanco will enter into a binding agreement to split the costs and profits of mining, processing and selling lithium spodumene concentrate to the global market based on prevailing spot prices for lithium spodumene concentrate.”
Now, prudent investors will notice that there are a lot of steps to be completed before lithium spodumene concentrate is actually produced for sale. However, those steps are in hand and production should begin fairly shortly.
I am always an optimist when it comes to explorers becoming developers and then producers. The reality is this is quite a rare event. However, the deal Grid struck with three investor groups, two Australian, one American, which raised $8.52 million dollars, suggests that people who know a lot more about geology, mining and world markets than I do are also optimistic.
“These are investors with knowledge and the right motivation,” said Dunbar in our interview. “They liked the deal and our business plan. They realize that the stock can go up over three or four years. They really liked the assets and said, “We think we can help.”
One of the advantages of dealing with experienced mining and engineering investors is that they actually know what they are looking at when they do due diligence. “We sent them our information which they looked at,” said Dunbar. “They sent two guys to look at the properties. One was a very experienced geo, the other was more a finance guy. Experienced people know what they are looking for. They looked at the core in our warehouse, our resource models and other technical reports and visited our properties.” (motherlodetv.net)
Their investment, taking a 27% ownership stake in Grid, is the sort of endorsement I very much like to see when I am investing.
The clincher for me, at least, is Dunbar himself. Rob has been in the exploration and development business for years. He is well aware of the pitfalls of moving from exploration to production. In conversation, he is, if anything, under promotional. He simply tells the Grid story, lets the price of lithium speak for itself and moves forward.
So I bought my Grid shares at $0.145 and they traded as high as $0.20 today. Always happy to be green, but I am not holding Grid to make a nickel a share. I don’t think Dunbar’s investors are either. (Especially as they entered a one-year voluntary hold period as part of the deal.) No, I think Dunbar’s investors are looking for 5-10x over a few years. So am I.
[Disclaimer: This is not investment advice. I am not an investment professional. I am down about 30% at the moment on my overall portfolio. I will write about companies that I hold. I will disclose any holdings. Do your own due diligence. Do it hard. Call the CEO.
I currently own shares in Grid which I intend to hold but which I may sell at any time.
Grid is a client as well as a holding.]