Recharge Resources Ltd. (RR: CSE) (RECHF: OTC) (SL5: Frankfurt) is accelerating operational momentum. Last week, they 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 Argentinian project may enjoy a similar development speed. Recharge said it's working closely with in-country advisors on the fully funded single 450-meter production diameter, a mission intended 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. Recharge expects the high flow rates to result in reduced operational costs, including 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 better news for RECHF and its investors is that the new approvals broaden Recharge's development mission.
Video Link: https://www.youtube.com/embed/PiG-c9rIPT8
Broadening A Development Mission At Pocitos
With new approvals, RECHF can move 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.
There's more to like about the Pocitos Project. Located approximately 10km from the township of Pocitos, it's supported by a well-established services infrastructure, including important accessibility by road, access to gas, electricity, mobile telephone, and internet services. Moreover, 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.
Expectations are for near and long-term project success. 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. 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.
The Pocitos project isn't all that's in play.
Developing Georgia Lake And West
Recharge Resources is also developing promising Georgia Lake and West lithium projects, located approximately 160 km northeast of Thunder Bay, Ontario, within the Thunder Bay Mining Division. Some of these properties border parts of the Rock Tech projects, which expects to finalize a more than $670 million high-quality lithium supply deal with Mercedes-Benz AG.
Recharge Resources is optimistic it can do the same, banking on inspiring heritage. 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, as reported in Rock Tech's Preliminary Economic Assessment filed in March of 2021.
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, the recent strength in RECHF stock should come as no surprise.
And those gains could be the precursor of more to come. Remember 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.
Put simply, 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.
Massive Demand 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.
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 US 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 US market. Factoring in global market demand, that number could be multiples higher.
Global Demand Enhances The Revenue-Generating Opportunities
That's the more appropriate number to watch since RECHF is intent on capitalizing on its production opportunities and becoming a vital battery metals contributor to a global market. The market potential is massive. Since 2017, EV sales have been soaring, with more than 17 million vehicles sold, 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.
And 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.
That interest is already a value driver in play.
Fueling The EV Sector
Companies like Tesla (NASDAQ: TSLA) openly secure 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 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 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 positioned 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 In The Recharge Resources Portfolio
They are 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.
Hence, 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 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. Also, a single mining score from any of its projects can influence that trend. And as noted, the most significant part of that mission may be cleared- they have the properties to make that happen. Not only that, they are filling an important 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 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.
Bullish Trend Intact As Markets Expand
Thus, the recent move higher in share price may only be the first leg of more appreciable gains. Investor optimism and speculation suggest that with its Phase 1 development plans being expedited, the $1.00 level is a reasonable near-term price target, especially if survey results are published as expected. It's noted that 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.
Remember, while the Rock Tech news has inspired bullish speculation, the biggest attraction to RECHF isn't about Rock Tech. It's about RECHF and, more specifically, its position to capitalize on a significant near and long-term business opportunity. That's where investors should focus, recognizing the value inherent to project potential still disconnected from its share price.
Moreover, with RECHF expediting plans to develop its properties and monetize its assets to markets showing no signs of slowing, investing ahead of imminent updates may be a timely consideration. Also, RECHF is also well-positioned to capitalize on the benefits of feeding a "seller's market" where pricing power is likely the norm for the long term. And, as noted, just proving assets could be enough to maximize that opportunity.
Hence, the sum of its parts makes RECHF an attractive opportunity. They have promising projects in proven territories, border properties making more than half-trillion dollar deals, and are accelerating operational momentum with new permits in mining-friendly jurisdictions. Thus, with several project updates expected by the end of 2022, recognizing the investment opportunity is one thing; acting on it may be the better consideration. After all, RECHF is offering a lot to like.
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