Dear reader,

While the markets remain jittery and are looking for every excuse to sell off, I wanted to share with you some opportunities that were even undervalued before the recent pullback and could be seen as deep value plays now. However, they all have mid term catalysts allowing for multi bagger potential.

Before sharing the opportunities, please find here my point of view on the current situation in the markets. This week has been especially volatile with the US FED’s FOMC meeting coming up today (Dec 15th) and will most likely remain volatile after the meeting depending on how the FED’s comments are interpreted by the markets. The overarching fear is that due to the realization that inflation is not transitory, the FED has to pull forward the planned interest hikes and tapering. This would drain liquidity from the stock market and hurt stocks which have extremely back loaded valuations. Investors that were forming their own opinions based on data and who weren’t following the herds knew since at least January 2021 that inflation is NOT transitory. We have been positioned in equities that perform well in inflationary environments, but the problem has been that the overall markets/traders were still playing by the playbook set by the FED. They didn’t understand that the FED has no intention of fighting inflation. This week there might be an inflection point and a change in market sentiment. For a deep dive on this topic I recommend listening to Peter Schiff’s podcast. He does a great job of explaining inflation, the economy and why the FED is trapped.

“You are not putting the fire out by pouring less gasoline on it” - Peter Schiff 

In these times it is important to look for opportunities in plain sight while nobody is looking.

Lake Resources (ASX:LKE)
Clean lithium developer Lake Resources NL confirms that drilling to date at its flagship Kachi Lithium Project continues to reinforce prior lithium assay results and indicates lithium brines extend well beyond the limits of the current resource. Continued similar results would support a doubling of future planned production targeting 50,000 tpa LCE (lithium carbonate equivalent).

These are extremely bullish news as lithium prices have increased from $6K per tonne to $40K in 2021 alone. LKE currently has a market cap of 1bn AUD based on production of 25K tpa LCE. Comparable producers in the same region like Livent have a market cap of 5bn AUD while producing only 16.6K tpa.

With a 50K tpa production target, LKE should have at least 10X potential from today’s valuation.

American Manganese Inc (TSX-V:AMY)

American Manganese Inc., a pioneer in advanced lithium-ion battery cathode recycling and upcycling, and its independent R&D contractor Kemetco Research Inc. ("Kemetco") are pleased to report that the 6,700 square foot demonstration plant facility in Greater Vancouver, Canada, is prepared and taking delivery of major equipment to advance its RecycLiCo project. With planned operation start-up in February 2022, American Manganese's 500 kg/day cathode waste RecycLiCo plant is poised to become the first hydrometallurgical demonstration facility in North America for lithium-ion battery recycling and upcycling.

The Company's ultimate business model is to license and joint venture its patented RecycLiCo process to battery and electric vehicle manufacturers as an in-house technology partner that offers a circular supply of cathode precursors and lithium compound products for zero waste battery manufacturing.

American Manganese has confirmed that its patented and closed-loop RecycLiCo process flowsheet can recycle over 99% of the lithium, nickel, cobalt, and manganese in lithium-ion battery waste and upcycle them into high-value cathode precursors and lithium compounds. 

With this news release we finally have a timeline for the demonstration plant and Larry mentioned in an interview that they will be able to calculate costs based on the demonstration plant. This means they can get ready to win their first deals. As they are focused on a licensing and JV model for their RecycLiCo process, AMY will be an asset lite royalty type business - perfect for the inflationary times ahead.

All of this is happening in the backdrop of VW Group announcing a battery company spin out and recycling being a key component.

Fluor Corp (NYSE: FLR)

Fluor Corp announced that NuScale Power, LLC, in which Fluor is the majority investor, has signed a merger agreement with Spring Valley Acquisition Corp. (NASDAQ: SV) (Spring Valley). Fluor has invested more than $600 million in NuScale Power since 2011 to help bring its technology to market. The proposed transaction is anticipated to close in the first half of 2022 subject to customary closing conditions. Upon completion of the transaction, Fluor projects to own approximately 60% of the combined company, based on the PIPE investment commitments received and the current equity and in-the-money equity equivalents of NuScale Power and Spring Valley.

When I first bought the FLR stock I had speculated on the NuScale spin out and am happy to see my vision materialize. While many will buy the SPAC equity SV directly, I think it is more beneficial to own FLR. Fluor is a turn around story with a price/sales (TTM) of 0.25 and growing earnings. Contrary to SV they have revenues, earnings and are leveraged to the upcoming commodities super cycle. Last but not least, FLR clarified in the PR that they would own 60% of the combined company.