As they say, no market goes straight up. But, knowing that doesn’t make it less painful to watch portfolio values shrink in the process. After all, no one buys stocks with the expectation of declines. Instead, everyone “buys winners.” And, without exception, one of their best picks in the past few weeks comes in a nano-cap package, Surge Battery Metals, Inc. (OTC: NILIF). Since the start of the new year, its shares have been higher by roughly 40%. However, that’s after profit-taking. Year-to-date, NILIF shares skyrocketed by over 90% before giving up some of those stellar gains heading into a holiday-shortened week.
Still, a 40% gain is more than impressive in normal market conditions, but more remarkable is that NILIF stock is surging at a time when markets have been at their weakest. The NASDAQ officially entered bear market territory last week. And keep in mind that metric averages the largest companies in the group. Small, micro, and nano-caps typically get pounced exponentially harder than their large-cap brethren. However, that’s not near the case with Surge Battery Metals stock. In fact, it’s fair to call a bull market for NILIF shares. And, for longs, seeing what NILIF stock can do during broad-based market declines bodes quite well for what it should do when the bulls regain control of the markets. Make no mistake, they will.
Know this, too. Investors putting money to work during and after a bear market usually do so with more discipline. So, it makes sense for those looking for investment opportunities to focus on companies in the right sector at the right time. Moreover, finding a company in a booming industry that is also well-positioned to accelerate growth through a risk-mitigated business plan can add an appreciable multiple to an already bullish proposition. Surge Battery Metals checks those boxes, and that could make its impressive YTD gains the precursor of more to come.
Substantial Assets Expose Value Proposition
In fact, the last two quarters in 2021 alone set NILIF up for a potentially transformational period of growth this year. They added to an already impressive list of operating assets, completed a capital raise putting them in one of its best cash positions ever, and de-risked its opportunities by focusing on monetizing projects in the most mining-friendly jurisdictions in the world. Not only that, NILIF completed several deals, including entering into an option agreement with Lithium Corporation (OTCQB: LTUM) that could transform this nano-cap exploration company into a revenue-generating juggernaut.
The more excellent news is that while 2021 set NILIF up for record-setting performance this year, they haven’t slowed down their deal-making prowess. Last week, Surge announced staking a 1,640-acre property in the Teels Marsh Playa, Mineral County, Nevada. Considering it’s located in an active region for lithium exploration and production, about 84 km northeast of Albemarle’s Silver Peak brine mining operation, it may be one of the reasons the bulls are sending NILIF stock higher.
Of course, bulls are also riding the momentum from the potential interest in the deal with Lithium Corp. That project can be a game-changer on its own, with NILIF planning to increase production activity by drilling into claim holdings in the prospect area that expands 5,560 acres. Moreover, because terms allow Surge to make staged cash and share payments and incur a defined $1,000,000 in exploration expenditures to earn an undivided 80% working interest in the San Emidio Lithium-in-Brine property, much of its $4.2 million in excess working capital at the end of last quarter can stay with the company.
That’s excellent news, especially with Surge accelerating explorations in at least two countries.
Targeting Several Valuable Markets
And keep in mind, NILIF has positioned itself to benefit from a wave of client interest, especially from an EV industry that is growing at a pace even its staunchest advocates wouldn’t have predicted. If all goes according to plan, Surge will embed itself as part of an exclusive supplier’s list to EV and green metals markets expected to approach the one-trillion-dollar mark by 2030.
It’s not a far-fetched presumption, especially with Surge accelerating its operations at several of the most proven reserves in the world. As noted, these locations are more than proven by large-cap miners; they are located at the most mining-friendly jurisdictions in the world. Thus, with historical precedent and indicated reserves suggesting a future of success, Surge may not stay at nano-cap levels much longer.
In fact, piercing resistance at its 52-week high of $0.35 could be the spark to ignite a rally taking the company out of pennyland status.
Proven Assets Can Justify The Rally
Reaching the $1 mark isn’t an overly ambitious target, either. Surge is better positioned than ever to maximize its investments in multiple interests. In addition to expanding its interest with LTUM, Surge has stakes in three mining properties that can turn valuable battery-producing metals into dollars. Even better, its properties offer diversification, enabling Surge to extend its market reach by selling a unique assortment of metal assets. As mentioned, its business targets markets with record-level demand, and that demand also puts massive revenue-generating opportunities in Surge’s near-term sights.
Thus, comparing NILIF’s current market cap to its near-term sales potential doesn’t even serve up an appropriate opening bid to compensate for a forward-looking valuation. Granted, some investors may be waiting for when metals come out of the ground to take a position. But, while prudent in some ways, they could be leaving significant value on the table by not taking investment action sooner than later.
Investors, by the way, are being given plenty of reasons to attack the long side of the trade. In fact, updates about its British Columbia operations alone put NILIF’s pace of growth into warp speed, banking on two locations loaded with copper, nickel, and other valuable metals. Both can be revenue-generating game-changers.
Its Caledonia location, located within a 31-mile long copper belt and 7 miles away from BHP’s Island Copper Mine, is metal-rich, indicating substantial recovery rates for copper and silver across the 4,302-acre allotment. The second location in Central British Columbia is near another proven nickel mining project, heightening optimism to the prospects of finding another large pool of assets. Already, surveys indicate substantial pockets of hard nickel, cobalt, chromium, and awaruite. Of course, mining the metals is only part of the equation. Selling it is the better part.
In that respect, Surge should meet no market softness. Demand is surging, with each metal being an integral ingredient to producing EV batteries. If anything, buyers of these metals are getting more aggressive, sometimes buying output before a dig starts. That makes the combination of having the right metals and pricing power a one-two punch that prospective investors shouldn’t ignore. But there’s more than its BC operations and deal with Lithium Corp to support that consideration.
Surge also expects to drive revenues through its assets at its Northern Nevada Lithium Project, alongside Lithium America, America’s only current lithium producer. In fact, from that project, Surge expects to maximize the element-rich value of the property through a strategic plan that combines mining efficiency with marketing expertise. And like the EV battery metals, lithium is one of the most valuable elements powering the electric battery movement, and demand for it, too, is off the charts.
Soaring Demand From EV Sector
Indeed, that’s to be expected. Today, 18 of the largest 20 manufacturers spend billions on EV design and production. There’s more than that, but those 18 alone will generate billions in purchasing power. Even better, unlike the rare earth metals market that sent those asset prices soaring and then crashing, the demand for battery metals and lithium can be a more robust, stable, and long-term contributor to mass-market applications.
The better news for those that mine the metals, like Surge, is that pound for pound, battery metals are in a better market position than rare earth metals could have ever hoped for. Hence, theoretically speaking, Surge is sitting on mountains of cash. And it can get more valuable every day.
Best of all, Surge provided a shareholder update confirming they are funded to complete its 2022 explorations. Better yet, beyond funded, they have ample reserves. Thus, with Surge enjoying the operational and financial strength that can lead to securing supply deals ahead of metals being pulled from the ground, its valuation today leaves a lot of dollars on the table. But, if the past three weeks are any indication, the window of this wide gap between intrinsic assets and market cap is closing quickly.
The EV Trend Is Just Getting Juiced
But there’s a value kicker as well. While the EV sector is hot today, expect it to be scalding hot in the coming weeks, months, and years. And with NILIF smack in the middle of the trade, its investors can enjoy a potentially lucrative bull run. Remember, despite EV sales jumping over 40% from 2020-21, continued EV adoption and global mandates will likely push that percentage into triple-digit growth in the next five years.
Further, as technology ramps, current market opportunities will be a drop in the bucket compared to the number of applications that Surge’s “battery,” green metals, and lithium can power. The best news regarding Surge is that they, too, are in the business for the long haul. Better still, it’s important to note that Surge’s approach to mining can be profitable sooner by mitigating risk. How? By utilizing prospecting, geological mapping, and rock and soil sampling to determine which properties provide the quickest and most efficient revenue-generating opportunity. And with sales channels clearly defined, the cost of managing inventory shouldn’t be a drag, either.
There’s better news still. Surge’s bottom-line growth should be expedited from a copper, nickel, and lithium market expected to increase 15x by 2030. Here’s an additional consideration that also holds tremendous operational value- Surge’s projects are ESG mandated. And that’s a big deal. In fact, ESG (Environmental, Social and Corporate Governance) mandated companies are projected to grow almost 3x as fast as non-ESG-mandated businesses.
Thus, as decision-makers prioritize the value of environmental sustainability, Surge should continue to hover near the top of contract lists for consideration. In other words, with its ESG distinction, Surge is better positioned than most to expand its operations and take advantage of fast-moving, competitive markets. In many respects, with its ESG designation, Surge can better meet specific demands ahead of more senior mining companies.
Value Exposed, Opportunities In Plain Sight
The better news- NILIF is showing no sign of slowing down its intent to deliver a breakout year in 2022. And more than intent, Surge has reserves in the ground to capitalize on enormous market demand that, when combined with expanding lithium interests, makes the valuation disconnect more than attractive; it’s compelling.
Frankly, taking a sum of its parts that combine Surges operations, balance sheet, and accretive projects already presents a case for Surge stock to increase 2X from current levels. Still, that only brings them back to their 52-week high. The more appropriate value, noting that Surge is better positioned for growth than ever in its history, is likely significantly higher. Hence, current prices may simply be too good to ignore.
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