Lithium Australia offers investors more upside to success
Before you begin discussing Lithium Australia NL (ASX: LIT) it is best to remind yourself of the ambitions of this company. As it says on their website, LIT “aims to control the greatest lithium resource base of any entity worldwide, producing battery-grade Li carbonate from Li micas, the ‘forgotten Li resource’.”
It is through this prism that you watch moves this company makes, and it has made several moves in recent days. This has been accompanied by a sudden surge in market interest. Last Wednesday, some 408,791 shares went through the market. Come Thursday of last week, volume soared to 7.24 million, followed by a relatively subdued 1.72 million on Friday. This week, though, has been busy: 11.74 million on Monday (and a 24.1% rise in price) and then 10.7 million Tuesday (with the price gaining another 16.6%). This Wednesday, while the price retreated by a small 7.1%, another 12.47 million shares went through the Australian Securities Exchange.
If you check the investor chatrooms, the almost sole topic has been the announcement Friday of the bonus issue. Investors are being offered one new partly paid share for each two fully paid shares they own.
Let me pause at this stage to explain something about “No Liability” status on the ASX. And LIT is Lithium Australia NL, not Lithium Australian Limited. The NL tag is available only to mining companies and it allows them to issue partly-paid shares on the basis – and this is the key point – that they are not entitled to calls on the unpaid issue price of shares; with “Ltd” status the shareholders are legally require to pay the call. The “NL” tag also gives the company more flexibility: no liability companies are not required to specify the date or dates on which calls will be made, and the shareholder at the time the call is due may pay the call or forfeit the share.
In years gone by, a great number of Australian mining juniors opted for the “NL” tag because they could more easily attract new capital if investors knew they could not be hit for the rest of the money if the junior went broke. In more recent times, the “NL” status has been rarely adopted and relatively few juniors still use it [and, indeed, many mining companies have switched to “Limited” status], which is interesting in light of LIT’s decision to remain an NL company.
In LIT’s case, the paid up portion of the new shares is A$0.0001; the unpaid portion is A$0.2499. With LIT’s price at A$0.195 on Wednesday, those buying the bonus shares will be assuming that the stock goes way past A$0.25. [And it’s worth mentioning that it is lithium that at present seems to be the hottest item for speculators in Australia. In what is an eerie replay of the 2007 uranium frenzy and the more recent graphite one, more and more becalmed mining juniors are announcing they have acquired lithium projects. LIT has the advantage of being one of the early movers.]
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But there’s been plenty of other action for Lithium Australia.
Last week the company showed it was remaining active across a number of fronts.
Last Thursday it announced two developments. One, it was pulling the plug on proposals to work with European Metals Holdings (ASX:EMH) on producing lithium in the Czech Republic because the two could not agree on commercial terms. Two, it reported additional lithium sources at its Ravensthorpe project in Western Australia, with the discovery of additional lithium pegmatites.
This week the company picked up more than 60 square kilometres in Australia’s Northern Territory containing at least 20 known pegmatites. The Bynoe project is 50km from the NT’s city capital, Darwin.
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