Last week, BEARING LITHIUM CO COM NPV (OTCMKTS:BRGRF) surprised Wall Street by jumping from $0.55 to $0.75 in a period of only four days. Day traders knew that the stock was quite hot after the company announced its merger agreement with Li3 Energy Inc (OTCMKTS:LIEG). Have a look at the price action.SourceThe reasons?On June 13, 2017, the company noted positive results from testing at its Maricunga Project; a JV with multimillion dollar company Veolia and GEA. In addition, some days later, the market got to know the shareholder lock-up agreements with certain Li3 Energy shareholders. The agreement represents 60.5% of the total outstanding shares of the target company.Bearing Lithium Corp.Bearing Resources Ltd. is engaged in the exploration and development of mineral property, headquartered in Vancouver, Canada. In the last quarterly earnings, the team found the following valuable assets:- Commander Resources Ltd (12,000,000 shares): as of January 21, 2017, it is valued at $495,000.- Golden Predator Mining Corp (35,000 shares): as of January 21, 2017, it is valued at $39,630.- Patriot Minefinders Inc. (1,200,000 shares)Furthermore, BRGRF owns the following mineral interests:
Finally, as of January 21, 2017, the balance sheet of Bearing Resources shows $1.87 million in cash on hand, and only $0.106 million in total liabilities.What is BRGRF buying this time? Li3 Energy, Inc.The management team running BRGRF is smart and quite opportunistic. It is not a secret in corporate America that the new gold is called Lithium, as it is used to build the batteries that new cell phones, laptops and computers need. The demand for this mineral has been rising for a while.
Li3 Energy is an exploration company in the lithium and potassium mining sector, based in South America? Yes, investments in Lithium. Have a look at the last 10-Q:
Current assets:March 31, 2017 June 30, 2016Cash$1,631$382,054Prepaid expenses and advances68,0439,169Total current assets69,674391,223Equity investment in Minera Li 6,160,771 6,779,337 Total assets $ 6,230,445 $ 7,170,560
Almost all the assets reported are investments in Lithium. The amount of debt owed by the company is small as compared to the assets:
Accounts payable$399,353$360,979Accrued expenses357,711306,861Common stock payable236,678236,678Notes payable50,000200,000Convertible notes payable, net of discount of $52,411 and $349,081 respectively472,590175,919Notes payable to MSB SpA454,901-Total current liabilities1,971,2331,280,437Long-term notes payable to MSB SpA-454,901Total liabilities 1,971,233 1,735,338
What made the share price jump in the short term?Maricunga ProjectThe acquisition of Li3 Energy gives the company BRGRF rights on the Maricunga Project, "project located in Chile, which represents one of the highest-grade development opportunities in the Americas". The good news that made the share price react were good results about the the preliminary concentration of brine from trial evaporation ponds in this project.
"Process studies to finalize a process flowsheet for the final production of lithium carbonate have been ongoing since late 2016. Initial positive results include the preliminary concentration of brine from trial evaporation ponds. Lithium-rich brine from the project is undergoing further processing to produce battery-grade lithium carbonate." Source
Shareholder lock-up agreementsFurthermore, day traders should have appreciated that the buyer signed agreements with shareholders representing 60.5% of the the power of vote in Li3. What does it mean? It means that shareholders of Li3 will approve the transaction. Thus, the chances of closing the transaction are much higher now. There are other precedent conditions, but given that the buyer is cash rich and the Li3 is a small company, we believe that the probability of closing is right now higher than ever. Check the share price reaction and also note the increase in volume.
ConclusionBearing Lithium Corp seems to be quite an interesting play. The company has plenty of cash, valuable lithium assets, and almost no liabilities. It has almost completed the acquisition of Li3, which owns working interests in the Maricunga Project, a promising Lithium mine delivering promising initial results about its mineral concentration. We expect more news from this project, thus be alert on this name, and subscribe to our subscription list if you want rapid delivery as the project progresses.We will be updating our subscribers as soon as we know more. For the latest updates on BRGRF, sign up below!Image courtesy of FlickrDisclosure: We have no position in BRGRF and have not been compensated for this article.
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