Recharge Resources Ltd. (RR: CSE) (RECHF: OTC) (SL5: Frankfurt) rally is gaining momentum. The stock reached $0.40 on Wednesday on 2X average volume, which is the highest level reached since April. And better still for investors trading the long side, the bias toward continuing the bullish cycle is intact. Earlier this week, coverage by Primetime Profiles highlighted a 23% spike in price, bringing investors attention to RECHF's expedited plans to initiate Phase 1 exploration projects at its Georgia Lake and West lithium properties. In that report, the author noted that the rally appears warranted, citing comments from RECHF that bring attention to its properties being in the right place at the right time to create potentially significant near term shareholder value.
Foremost, investors were provided detail into a deal made by its property bordering neighbor Rock Tech Lithium Inc. (RCK – CSE). And it's one that can bring substantial interest to RECHF. After all, it did for Rock Tech, after they announced in August a planned strategic partnership with Mercedes-Benz AG to produce and supply high-quality lithium hydroxide for the automaker and its battery suppliers. And the details show why investors are taking notice. Under the intended final agreement, Rock Tech expects to deliver up to 10,000 tonnes of the high-quality lithium hydroxide per year starting in 2026, worth roughly $670 million at today's Lithium prices, 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. In other words, a lot of lithium is expected to be mined. And it's that connecting of the dots that is sending shares of RECHF higher. And it should.
As a bordering neighbor to a company that is preparing to supply more than half trillion dollars in lithium to a global business giant, Recharge Resources is certainly 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. And the even better news from an RECHF investors perspective is that the company is now intently focused on maximizing value from its properties sooner than later by accelerating development initiatives to meet surging demand for high-value battery metals from the green, renewable energy, and EV and fuel cell vehicle markets.
Right Markets, Right Place, Right Time
There's more good news for those reading between the Rock Tech news lines. Investors are buying in, evidenced by Rock Tech's announcement of closing a $40 million private placement and intending to use a potentially significant part of the net proceeds raised to finance the company's continued exploration and development of its Georgia Lake Lithium Property.
It's always an excellent sign when interest is supported by dollars. Recharge Resources. Company CEO and Director, David Greenway, thinks so, saying, "While we continue to advance our two fully-funded drill programs at Brussels creek and Pocitos 1 lithium Salar in Salta, Argentina, it is hard to ignore the developments by our neighbours Rock Tech Lithium and their new strategic partnership with premium automaker Mercedes-Benz. Recharge Resources will plan a surface reconnaissance exploration program on our Georgia Lake projects with a goal of identifying the potential for continuity of mineralization from Rock Tech's active development at Georgia Lake.
He's referring to his company's Georgia Lake North & West - Lithium Properties in Ontario, Canada. Specifically, the Georgia Lake North and West properties, located approximately 160 km northeast of Thunder Bay, Ontario, within the Thunder Bay Mining Division. More importantly to this discussion is that Recharge's property borders the North and West boundaries of Rock Tech Lithium's Georgia Lake Lithium Property, consisting of two claim blocks totaling 320 hectares (790 miles) and 432 hectares (1067 miles).
The heritage of those locations is inspiring. 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 that exposed the properties as an NI 43-101 Mineral Resource, as reported in Rock Tech's Preliminary Economic Assessment filed by Rock Tech in March of 2021. The Mineral Resource is summarized in the following table:
Of course, while past performance shouldn't be the most relied-on indicator of future success, the mining and exploration sector may be an exception to that rule. And with mineral deposits not necessarily stingy where they settle, bordering a property indicated to have potentially massive reserves is indeed bullish to neighboring prospects. Thus, investors may be correct to bid RECHF shares higher.
Massive Demand Is Here To Stay
And that trend deserves to continue. 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.
Remember, too, 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. Therefore, if results from its Phase 1 exploration programs come as expected, RECHF could benefit from value-creating opportunities through partnerships, leases, or contract commitments similar to Rock Techs.
As it stands, few, if any, arguments suggest that RECHF isn't in the right markets with the right properties at the right time. That's because they are and are also well-positioned to capitalize on record-setting demand and prices from an EV metals market that, in the U.S. market alone, could account for a more than 16X increase in the need for EV batteries by 2035. Keep in mind, that's just the U.S market. Factoring in global market demand, that number could be multiples higher.
Global Demand Makes The Opportunity Exponentially Greater
And that's the better number to watch since RECHF has every intention on capitalizing on its production opportunities and become a critical metals and minerals supplier to a global market. Remember, since 2017, EV sales have been soaring, with more than 17 million vehicles sold, scoring over $140 billion in revenues for manufacturers and components suppliers. But, here's the exciting part of that number; over that same period, EV sales accounted for only about a 3% share of the total vehicles sold. 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.
And so is an 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.
Lithium Fuels The EV Sector
Companies are doing just that, with companies like Tesla (NASDAQ: TSLA) openly securing as much of these precious battery metals and minerals as possible. And they likely 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 biggest 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 keep in mind that TSLA is just one player. As of 2022, over 20 manufacturers and component suppliers are now considered "major" players. And despite having different business agendas, they all share in common needing the same lithium, nickel, cobalt, and other metals to power their creations. With that comes their understanding that not securing a power source- their cars and products will face a difficult, if not impossible, challenge getting their goods to market.
Recharge Resources intends to help cure that possibility. And to capitalize on and maximize opportunities, they've done well to position themselves as one of the early and vital resources and contributors for lithium and nickel in North American markets. But that's not all RECHF is doing.
Diversification To Meet Demand In Massive Battery Metals Markets
RECHF is diversifying, 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 up for debate 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.
Thus, that focus 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 within reason to believe that RECHF could earn a sizable market share, whether alone or through partnerships, after reporting already being in the early stages of proving its cobalt resources. If those reserve estimates get verified, it's feasible for RECHF to potentially become one of the first North American cobalt resources brought into commercial production. If so, expect RECHF's market cap to get a substantial raise.
In fact, that's a likely scenario and justified from just a single mining score from any of its projects. And as noted, the biggest part of that mission may be cleared- they have the properties to make that happen. Not only that, they are filling a significant need knowing that large-cap miners alone can't haul the load and supply global demand. It just 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 U.S. 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.
Gains Hold, Bullish Trend Intact
That could be why speculation suggests that the recent surge in share price may only be the first leg of a more significant move higher. Speculation suggests that with its Phase 1 development plans being expedited, even the $1.00 level is a reasonable near-term price target, especially if survey results are published as expected. Remember, if Recharge Resources can prove it's sitting on assets, potential client interest would likely surge, bringing with it opportunities to ink deals with global business giants similar in size to the one being jointly entered by Rock Tech and Mercedes-Benz AG.
It could even help set a precedent. But while the Rock Tech news has inspired bullish speculation, the biggest attraction to RECHF isn't about Rock Tech. It's about RECHF and the position they are in to capitalize on a significant near and long-term business opportunity. It's there where investors attention should lay, recognizing that the value inherent to RECHF from its properties is still untapped from a share price perspective. In addition, news shows that RECHG isn't playing the slow game.
Instead, they are expediting plans to develop its properties, monetizing its assets to markets showing no signs of slowing, and feeding into a "seller's market" where pricing power is likely the norm for the long term. It's that combination of things, including land, property pedigree, neighboring deals, that is exposing RECHF's current share price as an ideal price point despite scoring multi-month highs. In fact, with projects updates expected by Q4, recognizing the the opportunity is one thing; acting on it is another. In this case, the sum of RECHF's parts suggest doing the latter may be the wiser choice.
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