Surge Battery Metals, Inc. (OTC Pink: NILIF) was already positioned to create potentially enormous shareholder value in 2023, but after its announcement on Monday, that mission could be expedited. Specifically, NILIF announced adding industry veteran Iain Scarr to its Board of Directors. Investors should appreciate the value added: Not only does he have a BSc in geology from California State University and an MBA from the University of Southern California, but impressive academics give way to formidable work history.
Indeed, with decades of industry experience under his belt, Mr. Scarr brings more than an excellent resume to NILIF. His 29-year tenure with Rio Tinto, including his position as Commercial Director and VP of Exploration, Industrial Minerals Division, could open doors of opportunity to NILIF faster than many expected. Remember, investors following NILIF aren't thinking of the company's creating value as a long-term proposition anyway. On the contrary, investors ran NILIF shares higher by 28% in April after a series of updates showed that Surge Battery Metals is better positioned than ever to capitalize on several developing market opportunities in play from battery metals demand reaching fever pitch levels.
With the assets to supply, license, or partner, enhancing an already impressive management team was the next obvious step. With Mr. Scarr, they’ve done that. He was responsible for multiple mineral discoveries in North America, South America, and Africa; he also worked on initial testing and commercialization activities for the Jadar lithium-borosilicate resource in Serbia. Additionally, through his IMEX Consultants, he provides industrial minerals consultancy across the entire value chain, from mineral exploration to mine and refinery development and commercialization, specializing in lithium, boron, potash, and sodium alkali resources. But there's more value to his joining NILIF.
Enhancing An Experienced Management And Development Team
Mr. Scarr can be a tremendous asset to exploiting company opportunities in the lithium space, and he’s demonstrated that capability. During his senior role tenure with Lithium One Inc., Mr. Scarr brought the Sal de Vida lithium brine project in Argentina through feasibility, a project subsequently merged with Orocobre Limited. He also participated in developing the Rincon Lithium Project with Enirgi Group Corp, later acquired by Rio Tinto for $825 million. Impressive, but there's still more. His third lithium success came in the Director and VP Exploration role for Millennial Lithium Corp., which resulted in the sale of the Pastos Grandes Lithium Project to Lithium Americas Corp for $400 million. In short, this addition to the board can turn ambition and assets into dollars.
His arrival is timely and perfectly complements NILIF's commitment to building a team with the lithium market expertise to maximize the value of company assets through development or deal-making. Either can be a win for NILIF and its investors. And looking at the mega deals he helped facilitate, it's fair to suggest that similar success at NILIF could accelerate their transformation from an emerging microcap metals exploration company into an appreciable supply chain contributor. Best of all: that could happen sooner than later. In its announcement welcoming Mr. Scarr, Surge Battery management noted he will be actively involved in the growth and development of its flagship Nevada North Lithium Project asset.
Keep this in mind. Leveraging decades' worth of industry relationships, Scarr brings into play a reality about the NILIF value proposition: Surge Battery Metals doesn't necessarily have to drill holes to create shareholder value. Just proving they are sitting on metals and minerals stockpiles can be enough to support and justify higher share prices. Many updates on the prospects of their project locations have been positive, and the better news is that there is no shortage of demand for what NILIF intends to market.
Instead, potential clients in its target markets, including many EV manufacturers needing metals and minerals to create battery power sources for their products, are growing. Moreover, as more manufacturers enter the space, NILIF benefits from serving limitless needs with inherent sellers' market pricing power.
Battery Metals Demand Fuels Value Proposition
Yes, microcaps in the sector have been historically risky. However, NILIF's asset portfolio considerably mitigates downside risk. More specifically, unlike many sector peers, NILIF has assets in mining-friendly jurisdictions and, just as importantly, holds the necessary licenses and approvals to develop. Thus, don't be misled by this company's $0.20 price per share; NILIF is exceptionally well positioned fundamentally and financially to create potentially enormous shareholder value in 2023.
Part of that is inherent to being in the right sector with the right assets at the right time. It's no secret that companies like Tesla (NASDAQ; TSLA), Ford (NYSE: F), and General Motors (NYSE: GM) are aggressively bidding for the types of output NILIF intends to market. Tesla has been upfront about its level of need, recently suggesting it wants to create its own lithium production facility. Now, whether that's posturing rhetoric or a legitimate intent, the statement does provide a not-so-subtle message: companies appear willing to buy and/or source as many precious minerals and metals as possible to power their vehicles.
As important, especially to the explorers like NILIF, deals can be made pre or post-drill. Remember, these beautifully manufactured EVs would be nothing more than shiny showroom pieces without batteries. Thus, while building a dedicated supply chain could be a strategy for some, the quickest and most efficient path to securing the battery metals needed is to go to companies already positioned or positioning to deliver. That includes NILIF, whose means to provide and meet that demand are rapidly increasing in capacity.
Expanding Its Asset Base In Nevada
In April, Surge Battery announced entering into an option agreement with Nickel Rock Resources Inc. to acquire the remaining 20% interest in the HN4 and the N100 mineral claims in central British Columbia. This new agreement enhances an existing one where NILIF had a Property Option Agreement to earn an undivided 80% interest in specific mineral claims from Nickel Rock, a project comprising two non-contiguous mineral claims groups of six separate blocks in central British Columbia. They are of significant size and depth.
One of the claims in the Mount Sidney Williams area (claim HN4) covers 1863 hectares (approx 4603 acres) immediately south of and adjacent to the Decar Project. That project is already being advanced by FPX Resources, including 5 claims in the Mitchell Range area, northeast of Decar (N100 Group), covering 8659 hectares (approx 21,396 acres). Here's the benefit to Surge Battery. As a result of the newest consolidation agreement, Surge Battery Metals will own a 100% undivided ownership in the claims, three of them subject to 2% net service revenue. Both projects target the nickel/iron alloy mineral "Awaruite" and are hosted by serpentinized intrusive rocks of the Trembleur Ultramafic Unit that also hosts, regionally, two large-scale nickel/iron deposits under exploration and development by FPX Nickel Corp (OTC Other: FPOCF).
Once these claims transfer, the consolidation into a 100% ownership position in the HN4 and N100 group of claims provides NILIF with much greater flexibility when charting future exploration activities for the Surge Nickel Project. Keep in mind that the properties have already demonstrated metallic mineralization, including nickel, cobalt, and chromium. Notably, while nickel and cobalt mineralization on the properties have yet to be intensely explored for nickel's presence in the nickel/iron alloy, awaruite has recently been documented. While all three present a trifecta of revenue-generating opportunity, developing the potential inherent to just the latter can justify and support a sustainable boost to NILIF's valuation.
Fundamentally And Financially Able To Expedite Ambitious Agenda
The even better news is that they have the cash to keep programs active. Surge Battery completed its previously announced private placement that raised total gross proceeds of $908,082 subject to final Exchange approval. Those funds are intended to expedite the development of its significant 2022 lithium clay discovery at its Nevada North Lithium Project (NNLP), a plan in motion after receiving approval from the Nevada Bureau of Land Management (BLM) permitting the next stage of drilling to further delineate this high-grade target.
According to Surge management, plans call to drill seven new locations within an extensive surface geochemical covering an area of about 1,700 meters east-west in mid-May 2023, subject to weather conditions. The drill program will occur in two bands, each roughly 300 to 400 meters wide, outlining a highly anomalous zone containing abundant sample points greater than 1,000 ppm lithium with samples as high as 5,950 ppm. The better news about this program is that it can be transformational for the company, which can happen faster than many think after already earning approvals to commence the expanded drill program.
In fact, that probability is in motion. Related to its Nevada North Project and following the success of its 2022 drill program, the opportunities for NILIF have expanded considerably, strengthened by the seven proposed drill locations to assess the deposit size of its lithium claystone resource at NNLP. The project's scope isn't random; these new drill targets have been selected to expand the currently identified lithium deposit to the west and north and, simultaneously, to determine continuity between the most northern and most southerly holes drilled in 2022's maiden drill program.
Prior work promotes reasons for optimism. The first round of drilling, completed in December 2022, identified a strongly mineralized zone of lithium clay mineralization over a strike length of almost 1,620 meters from NN2205 in the north to NN2208 in the south. Widths of the mineralized horizons, though not as well determined since the holes are mostly on a north-south alignment, are at least 400 meters wide, supported by highly anomalous soil values indicating the potential for these horizons to be much more significant. The industry language above is technical, but it all bodes well for NILIF.
Put more simply, what's been shown is the potential for a significant lithium deposit, a calculus exemplified by hole NN2207 which intersected the thickest intervals of lithium-rich claystone encountered to date, a total of 120.4 meters (395 feet) averaging 3,943 ppm lithium in four zones. Hole NN2208 had the most potent downhole individual sample of 5,950 ppm lithium between 45 and 50 feet (13.72 and 15.24 meters) of the maiden 2022 program. The company added that the average lithium content within all near-surface clay zones intersected in 2022 drilling, applying a 1000 ppm cut-off, was 3254 ppm.
A Surge In April Could Be A Precursor To More Appreciable Moves
Combining all the above, a compelling and justified case can be made for investors to take advantage of a current valuation disconnect. Even after its 28% spike last month, the totality of NILIF interests is still not appropriately represented in a sum of its parts equation. As noted, factoring the value inherent to just parts of the NILIF asset portfolio can support appreciably higher share prices.
In fact, a steepening of its share price is undoubtedly warranted from its Nevada Lithium Projects alone, where NILIF owns a 100% interest in 225 mineral claims located in Elko County, Nevada. But there's more. Other valuable assets include its Nevada North Lithium Project in the Granite Range southeast of Jackpot, Nevada, which targets value from a lithium clay deposit in volcanic tuff and tuffaceous sediments of the Jarbidge Rhyolite package. A third value driver is inherent to its Property Option Agreement to earn an undivided 80% interest in 16 mineral claims comprising 640 acres in Nevada's San Emidio Desert, known as the Galt Property. Recent mineral exploration produced encouraging samples showing a considerable means to turn ambitions into revenues. There's one more: NILIF's 100% interest in 663 ha (1,640 acres) property in the Teels Marsh Project, located in Mineral County, Nevada, can also be a value driver, noting it is an active region for lithium exploration and production.
Hence, when accounting for an impressive asset portfolio that is getting stronger, including through key hires, current share prices expose more than a disconnect; they expose opportunity. With that said, its stock price trajectory indicates that the window of opportunity at undervalued prices may soon begin to close. Thus, taking advantage of the disconnect early may be a wise and timely consideration.
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