Recharge Resources Ltd. (OTC: RECHF)(CSE: RR)(Frankfurt: SL5) stock has shown a remarkable ability to move higher independently of the broader market trends. In fact, contrary to nano-cap sector weakness, since May, RECHF shares closed over 73% higher than where they started that month. Moreover, the trend ahead appears to be set in a bullish pattern, with RECHF stock approaching multiweek highs on Friday with elevated volume.
Many reasons support the bullish sentiment, including the recent announcements indicating surveys completed show potentially better-than-expected reserves at its flagship mining locations. Those results are expediting the resolve of RECHF to develop its assets sooner than later, poised to accelerate monetizing its Pocitos Lithium Brine Project by moving forward with an inaugural NI 43-101, a completed MT geophysics survey, a pending drill program, and a planned upcoming NI 43-101 resource estimate. RECHF noted that its recently completed MT survey showed exactly where the conductive brines containing lithium have been concentrating, developments that inject increasing optimism that the property can generate potentially enormous returns for itself and its stakeholders.
That's not all the MT results put into play. They also serve as a pre-engineering step to bring RECHF closer to monetizing its Ekosolve™ Extraction project, with indicators showing performance and testing recovery rates for lithium brine ahead of a planned full-sized plant scale-up to process up to a 20,000 tonne per year. The Ekosolve™ Lithium Brine Extraction plant implementation will be located at RECHF's Pocitos project; data aggregation is underway, with recovery rates expected and published in the coming weeks.
Assets Supporting The Value Proposition
While that report is a forward-looking proposition, there's plenty to support higher share prices today. Current value drivers include its Pocitos projects, with bullish sentiment supported by the progress made at the Pocitos 1 project in Argentina. That completed groundwork positions RECHF better than ever to tap into valuable mineral deposits that can serve surging lithium and other battery metals demand. A significant accelerator to that intent is the company's earning approval from Argentina's Department of Mines to drill a production diameter well at its Salar Lithium Brine Project. That approval keeps the RECHF mission on fast-forward.
Other interests contribute to the value proposition. In June, RECHF announced that all assays had been received on its fully-funded spring drill program at its 100% owned Brussels Creek Gold-Copper-Palladium Project in Kamloops, BC, Canada. There, a new near-surface discovery has been made of a gold zone from 25.75m to 29.25m (3.5m), assaying 5.08 g/tonne gold. The intent of the 900-meter NQ drill program was to test the potential for copper-gold mineralization similar to that present at the adjacent New Afton mine owned by New Gold Inc.(NYSE: NGD).
Neighboring that location supports the belief RECHF can exploit value just the same, noting that the New Afton Mine occupies the site of the historic Afton Open Pit mine, which operated from 1977 to 1997. The present mine and concentrator facility commenced production in July 2012, and since, the mine produced 52,542 oz. of gold (AU) and 1,700,000 lbs of copper (Cu).
There's more to like. A recent update indicates how valuable a stake RECHF may hold regarding its option purchase agreement with Spey Resources. In fact, AIS Resources Limited (TSX.V: AIS, OTCQB: AISSF), a billion-dollar market cap miner, congratulated Recharge Resources on signing that agreement with Spey Resources Corp., which could lead to RECHF acquiring up to a 100% undivided interest in the Pocitos 2 Project.
AIS retains a 7.5% royalty of the FOB price of lithium carbonate or other lithium compounds sold on Pocitos 1 & 2 pursuant to AIS' underlying Option Agreement with Spey Resources. That means that if the Pocitos 1 and 2 options are exercised, AIS will receive $1,000,000 and $732,000, respectively, on or before June 30, 2023. Both Pocitos 1 and 2 have been optioned by Recharge Resources from Spey. That's a significant deal and option, noting that RECHF exercising its acquisition rights can significantly increase the size of its potential resource holdings.
Notably, proven reserves, those assets still underground, can be accretive to the RECHF balance sheet. And with RECHF moving toward advanced exploration stages in several projects, the more they prove, the greater the value added.
Nano-Cap Miner With Explosive Potential
Still, the most exciting part of the RECHF value proposition is that they are a company in motion, advancing multiple projects where if survey data posts as expected from its in-process exploration, RECHF will be a significant step closer to building an up-to-20,000-tonne lithium extraction Ekosolve plant at the Pocitos 1 project. The better news on that front is that once completed, RECHF has supply agreements in place, committing to sell up to 20,000 tonnes of lithium chloride/carbonate per year to Richlink Capital Pty. Ltd. The battery materials supply agreement was announced after executing a joint letter of intent.
That deal can be worth quite a lot. S&P Global expects spot prices for lithium carbonate to average at least $40,000 per tonne in the coming years as demand outstrips supply. Thus, assuming RECHF delivers the entire 20,000 tonnes as contracted, revenues could eclipse $800 million at expected exchange rates. Capitalizing on that opportunity could happen faster than many expect, considering that the company now has three existing drill holes in place in addition to its newest drilling and a CSAMT audio-telluric geophysical survey to contribute to an NI 43-101 mineral resource estimate.
Speculatively speaking, those activities help to mitigate downside risk to RECHF stock. A big part of that presumption results from RECHF benefiting from an Argentinian geological team empowering the company to expedite progress toward establishing a NI 43-101 compliant mineral resource. They are also helping to facilitate, even expediting, a scoping study of the project in collaboration with its Chinese offtake partners and investors for lithium chloride products at the Pocitos1 Project. The intrinsic and inherent value point to a similar direction- RECHF is positioning and preparing to feed the substantial global demand for lithium.
Lithium Is A Prized Commodity
Keep in mind that lithium demand is here to stay, putting RECHF in the right markets at the right time. Consider this: Elon Musk recently told his investors that his company is moving forward to build a lithium refinery on the Texas Gulf Coast to gain more control over the supply chain for EV batteries. And Tesla (NASDAQ: TSLA) isn't the only company working proactively to secure the assets needed to maintain production; Ford (NYSE: F), General Motors (NYSE: GM), and several other EV manufacturers are trying to secure as much lithium as possible. Some are trying to buy total production outputs from suppliers or even considering purchasing entire projects to support EV initiatives. Of course, they represent just one industry needing what RECHF intends to supply.
Consumer goods, defense companies like Lockheed Martin (NYSE: LMT), and industrials need what this nano-cap exploration company is in business to deliver. It's often said that value is at its best when on the ground floor, which makes sense, given that risk is still attached to the company. But, taken as a whole and accounting for the infrastructure already turning the gears of progress, there are still tremendous values to be had in under-the-radar exploration companies on the cusp of transformation.
RECHF makes that list. Supporting the case beyond what has been noted. The company is transparent, has an expert management team, and is accelerating the pace of its projects at locations where vast reserves have been unearthed historically. Few expect that will change during RECHF's mission, which could be why its stock performs exceptionally well despite intense broader market pressures.
Still, while all the above can be considered value creators, there's more to appreciate.
Valuable Assets: Georgia Lake And West Lithium Projects
Recharge Resources is also advancing promising Georgia Lake and West lithium projects, located approximately 160 km northeast of Thunder Bay, Ontario, within the Thunder Bay Mining Division. Parts of these properties border Rock Tech projects, which recently announced its expectation to finalize a more than $670 million high-quality lithium supply deal with Mercedes-Benz AG.
That deal leads RECHF to remain optimistic its locations can offer the same production promises. Known is the fact that the Rock Tech Lithium, Georgia Lake project hosts several spodumene-bearing pegmatites, with Lithium mineralization discovered in 1955 and subsequently explored by several historic owners exposing the properties as an NI 43-101 Mineral Resource. That was reported in Rock Tech's Preliminary Economic Assessment filed in March 2021.
While past performance isn't the most accurate indicator in many industries, it is within the mining and exploration sector. Remember, mineral deposits are not stingy where they settle, meaning that bordering a property indicated to have potentially massive reserves is indeed bullish to neighboring prospects. Thus, the attention to RECHF stock is not surprising.
Frankly, more is expected. Rock Tech intends to deliver up to 10,000 tonnes of high-quality lithium hydroxide per year to Mercedes-Benz AG starting in 2026. That's indeed excellent news for Rock Tech. Moreover, it also gives good reason for RECHF to trade higher in sympathy, noting that Rock Tech anticipates that the planned delivery of that product won't deplete its capable inventory, indicating a substantial amount of lithium is expected to be mined.
More directly, bordering a company preparing to supply many billions of dollars worth of lithium to a global business giant puts Recharge Resources in the right place at the right time. In fact, few argue against the statement that in the mining business, location is everything. And based on Rock Tech's deal, RECHF is sitting on a potential lithium windfall.
Cobalt: Another RECHF Value Driver
There's yet another potentially massive value driver in play. Recharge Resources has announced capitalizing on other market opportunities by adding a third asset to its business pipeline potential: cobalt. Cobalt is also a critical metal needed for EV battery production. However, more valuable to RECHF's opportunity to attract client interest is that virtually no cobalt production is happening in North America. It is debatable whether that's due to its fractional use compared to other necessary battery metals. What isn't, however, is that cobalt's need is no less critical than other battery metals.
And that inherent demand adds another appreciable revenue-generating shot on goal to the business plan. Moreover, as one of only a handful of North American suppliers, RECHF could earn a sizable market share, whether alone or through partnerships, especially after reporting that it's already in the early stages of proving its cobalt resources. If those reserve estimates are verified, it's feasible for RECHF to become one of the first North American cobalt resources brought into commercial production.
In other words, combining its parts, RECHF is ideally positioned for a potentially transformative 2023. And it can likely result from just proving assets under the ground. Remember, they have multiple shots on value-creating goals, with projects targeting the demand generated from a global shift to electrification. More simply, Recharge Resources in the sweet spot of opportunity. That advantage also keeps them on the radar for other companies needing a fast track to potential supply.
Positioned To Continue Its Bullish Trajectory
Combining assets, management, survey results, and working in the most mining-friendly jurisdictions make RECHF a value proposition too good to ignore, especially at current levels. Remember, RECHF is exploring promising properties in a sector where the large-cap miners can't fill the global demand. That makes the junior miners and exploration companies like RECHF vital to the supply chain.
Thus, while the mining space is speculative, even competitive, RECHF's sum of its parts equates to the company being at the right locations at the right times to exploit value from its assets. Moreover, the global push for electrification has made the competitive landscape somewhat more friendly. In other words, partnerships and financing to advance promising projects are easier to come by compared to times when supply outstrips demand. That reality could bode exceptionally well for Recharge Resources, whose property and project assets neighbor several of the world's most successful mining locations. If history repeats, and it often does in the mining sector, RECHF at these prices may be a gift that keeps on giving.
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