Recharge Resources Ltd. (RR: CSE) (RECHF: OTC) (SL5: Frankfurt) is consolidating at multi-month highs, bumping against the $0.40 level, it’s highest point since April 2022. The move comes after a string of good news. Last week, Recharge announced receiving approval from Argentina’s Dept of Mines for its imminent drilling of a production diameter well at its “Pocitos 1” Salar Lithium Brine Project in Salta, Argentina. That news followed the announcement of plans to expedite development at its Georgia Lake and West Lithium projects in Ontario, Canada.
The ecellent news about each is that the pace of development is accelerating. In Argentinian, Recharge said it’s working closely with in-country advisors on the fully funded single 450-meter production diameter, intending to confirm the flow rate, lithium content, and continuity of lithium brines delineated during previous drill campaigns for the establishment of a NI 43-101 compliant resource. A video published by RECHF shows the high flow rate encountered in both holes drilled in 2018. That flow pressure is potentially excellent news. Recharge believes is can be instrumental in reducing operational costs by lowering the number of pumps required and ensuring the columns have sufficient brine with the Ekosolve™ extraction methodology contemplated for the Pocitos 1 project.
The approval to expedite development progress in Argentina is more than a value enhancer; it expands RECHF’s development mission outside of other promising projects in mining-friendly jurisdiction Ontario, Canada.
Pocitos 1 Project Now In Play
And each are advancing. With new approvals in Argentina, RECHF is moving quickly to drill a production diameter well at the Pocitos 1 lithium salar. As shown in the video above, the flow rates of lithium brines were substantial. Moreover, with two existing drill holes in place, this new drilling contributes to establishing a NI 43-101 mineral resource estimate. It’s also further benefited by an Argentinian geological team enabling swift progress towards its primary objective of establishing a NI 43-101 compliant mineral resource, a scoping study of the project, and identifying offtake and supply opportunities for lithium products and strategic partners for the Pocitos 1 Project.
Location is excellent too. The property sits roughly 10km from the township of Pocitos and is supported by a well-established services infrastructure, including important accessibility by road, access to gas, electricity, mobile telephone, and internet services. In addition, previous exploration teams have spent over $1.5 million developing the approximately 800 hectares (1976 acres) site, including surface sampling, trenching, TEM geophysics, and drilling two 400m holes with outstanding brine flow results. That work has helped identify locations for immediate follow-up drilling and plans already designed and identified for upcoming exploration.
Optimism is high that the project will be a producer. Lithium values of up to 125 ppm from Laboratory analysis conducted by Alex Stewart were recorded by AIS Resources Ltd during the project’s first drill campaign in May 2018. In that evaluation, AIS used a double-packer sampling system in HQ Diamond drill holes drilled to a depth of 409 meters, showing the brine flow continued for more than 5 hours. With both drill holes indicating exceptional brine flow rates, it has led to Recharge expediting plans to drill a third production-ready drill hole to work towards a NI 43-101 mineral resource calculation.
While it’s a near and long-term value driver, the Pocitos project isn’t all that’s in play.
Georgia Lake And West Lithium Projects Advance
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 expection to finalize a more than $670 million high-quality lithium supply deal with Mercedes-Benz AG.
Recharge Resources is 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 of 2021.
While past performance isn’t the most accurate indicator in many sectors, 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 recent spike in RECHF stock is not surprising.
Actually, those gains could be the precursor of more to come. Keep in mind that Rock Tech expects 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. But it makes sense for RECHF to trade higher in sympathy, noting that Rock Tech expects that the planned delivery of that amount of product still won’t deplete its capable inventory, meaning there’s a lot of lithium is expected to be mined.
More directly, bordering a company preparing to supply more than half a trillion dollars in lithium to a global business giant puts Recharge Resources in the right place at the right time. In fact, few argue against the fact that in the mining business, location is everything when it comes to mining for metals and mineral riches. And based on Rock Tech’s deal, RECHF is sitting on a potential lithium windfall.
Demand Is Surging From Several Industries
Besides ideally located, RECHF exploration, development, and production initiatives target an EV and battery metals industry expected to become a trillion-dollar market by 2034. But with an anticipated CAGR of 18.2% over the next eight years, breaching the trillion-dollar mark could happen years before the end of this decade.
And remember that RECHF doesn’t necessarily need to mine the metals and minerals to deliver potentially exponential investment returns; just proving the reserves could be enough to increase share prices significantly. In that respect, if results from its Phase 1 exploration programs come as expected, RECHF could benefit from value-enhancing opportunities through partnerships, leases, or contract commitments similar to Rock Techs.
That’s a likely scenario, keeping in mind that RECHF is well-positioned to capitalize on record-setting demand and sellers prices from an EV metals market that, in the US market alone, is estimated to need a more than 16X increase in the need for EV batteries by 2035. And that’s just accounting for the US market. Factoring in global market demand, that number could be multiples higher.
Global Demand Makes The RECHF Opportunity Long-Term
That’s the more appropriate number to watch since RECHF is positioning itself to capitalize on its production opportunities and transition into a vital battery metals contributor to a global market. The sales potential from the EV market alone is massive. Since 2017, EV sales have been soaring, with more than 17 million vehicles sold and scoring over $140 billion in revenues for manufacturers and component suppliers. Still, the exciting part of that number is that EV sales accounted for only about a 3% share of the total vehicles sold over that same period. That signals that the industry, and the companies contributing to its growth, are still in the earliest stages of maximizing near and long-term opportunities. That’s excellent news for RECHF.
So is a recently passed infrastructure package intending to provide billions to expedite strengthening an EV industry and a shift to green energy. Those grants, awards, and contracts aren’t only for a selected few. Junior exploration companies like RECHF can also benefit from investment programs. In fact, that’s probable, as the domestic demand for critical green fuel continues to grow at a record pace. Moreover, in a green metals and minerals market with no borders, companies like Recharge Resources, which have promising properties and nano-cap valuations, could attract interest from deep-pocketed investors (companies) wanting to own the lion’s share of expected production.
Industry players aren’t shy about showing their need or greed.
The EV Sector Needs Metals
Companies like Tesla (NASDAQ: TSLA) openly secure as much of these precious battery metals and minerals as possible. And they don’t care if the supplier is a billion-dollar market cap miner or a developing company like RECHF; those that can supply the goods get the contracts. Tesla CEO Elon Musk has been outspoken on the subject, saying that with nickel being their most significant concern for scaling lithium-ion cell production, “Tesla will give you a giant contract for a long period of time- if you mine nickel efficiently and in an environmentally sensitive way.”
But TSLA is just one player. In 2022, over 20 manufacturers and component suppliers are considered “major” players. While having different business agendas, they all share in common the vital need for lithium, nickel, cobalt, and other metals to power their creations. With that need comes an understanding that not securing a steady supply of these critical metals and minerals can leave their products powerless. In that case, they would face a difficult, if not impossible, challenge getting their products to market.
RECHF intends to cure that potential deficiency. And not by supplying only the metals and minerals mentioned.
Digging For Cobalt
Recharge Resources is also capitalizing on other market opportunities by adding a third asset to its business pipeline potential- cobalt. It’s also a critical metal needed for EV battery production. But 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.
That demand adds another appreciable revenue-generating shot on goal to the business plan. Moreover, as one of only a handful of North American suppliers, it’s possible that RECHF could earn a sizable market share, whether alone or through partnerships, especially after reporting already being 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.
If that happens, obviously, the path of least resistance for RECHF shares is higher. Still, while the combination of opportunities is appealing, remember that a single mining score from any of its projects can influence an appreciable valuation increase. As noted, they could already be sitting on the assets to make that happen. Not only that, they will be needed, filling the that large-cap miners alone can’t supply. Having only a few multi-industry suppliers isn’t a realistic assumption. Actually, the opposite is true.
Junior miners and exploration companies like Recharge Resources are needed more than ever to meet the US and global supply needs. And even if investors take positions expecting small companies like RECHF to fill only “niche” opportunities, that’s not a bad option either. Those “niche” opportunities still keep multi-billion-dollar revenue-generating targets in the crosshairs.
The RECHF Bulls Have Reasons To Be Optimistic
Thus, the recent surge in share price may only be the first leg of more appreciable gains. Investor optimism and speculation suggest that with its combined opportunities all in-play, the $1.00 level is a reasonable near-term price target. That’s well supported by its advancing its Pocitos 1 and Ontario projects. Remember, too, while the Rock Tech news has inspired bullish speculation, the biggest attraction to RECHF isn’t about them; it’s about RECHF. More specifically its position to capitalize on a significant near and long-term business opportunity. That’s where investors should focus, recognizing the intrinsic and inherent to project potential still disconnected from its share price.
Hence, RECHF shouldn’t be evaluated as a one-shot at goal company. They have multiple, and, better yet, are located near proven territories and properties making more than half-trillion dollar deals. So it’s the sum of RECHF’s parts making the value proposition compelling. And the biggest part of that equation is that with operational momentum at its back, new permits issued in mining-friendly jurisdictions, and several project updates expected by the end of 2022, RECHF looks better positioned than ever to have a breakout period of growth. Tolling that into the equation, investment consideration is timely as well.
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