Two all-star long-short Fund Managers, John Deniz (Chief Investment Officer) from Paragon Funds Management, and Josh Clark from QVG Capital, lend their expertise on LKE (Lake Resources):
Here is the video:
https://youtu.be/_S0CnG74eBI?t=436
Transcript:
Ally Selby:
Next up we have Lake Resources. It was the best performing stock on our list. Its share price rose nearly 1163%. Can I do it again in 2022? John, is it a buy, hold or sell?
John Deniz (SELL):
Ally, it's a massive sell. If you could get the borrow, you'd want to short it. You do not want to be left holding the bag as they go into the truth-telling phase. They've got a challenging direct lithium extraction brine asset, poor management, a really lightweight board and their joint venture partner, I'd almost call a joke. They paid nothing for their 25% interest, which is a big red flag and it says a lot about the asset.
But more importantly, the resource - it's got a substandard brine and the only way they'll make it work is by throwing lots of asset at it. And good luck with that. It's going to be an expensive process and we doubt they'll get anywhere near their overly promoted project parameters. And if you pro-rata the market cap up, the market is paying almost $1.8 billion for the asset, which is so expensive.
Ally Selby:
John thinks it's a sell, but it just announced it was doubling its lithium production target at its flagship project. Over to you, Josh. Do you think it's a buy, hold or sell?
Josh Clark (HOLD):
I don't think I'm brave enough to be as direct as John. I was going to put a hold on the stock. I mean, there's a lot that John's mentioned that I'd agree with - it's certainly going to be a difficult one. Doubling their production targets is really something that's on a piece of paper. What you want to see is them double their actual production. That's night and day.
The reason it's a hold, as opposed to being a bit more negative, is it really is a play on direct lithium extraction, which hasn't been done before. It makes them a pioneer and there is a risk that that saying is true that pioneers die with arrows in their back. But my understanding of their partner, Lilac Solutions, which is helping them with the technology side of the equation, is that they do have some IP there, they do have some legitimate backers like the energy vehicle for Bill Gates, BMW, SK Materials. And there is a material probability that they could make it work. So, on that balance, I think the stock's a hold.
(20min delay)