The JMP Radar tracks companies whose fundamentals and/or valuation has changed significantly and suddenly. We then monitor progress in the company, looking for a catalyst to reverse the damage, resulting in a possible strong rally.
As always we look for situations which can provide our readers with gains of over 100%, and up to 1000%, in a short time frame.
Alset Energy Corp.
Shares Outstanding: 39,136,764
Aslet Energy Corp (ION) has landed on our radar recently, for the following reasons.
Shares in Alset, formerly Benton Resources (still headed by Stephen Stares) have recently fallen off a cliff due to a surprise revelation from the Mexican Mining Authority with respect to Alset’s prized Lithium Salars project in Zacatecas, Mexico.
First, A Chronology of Events
A little background first. In April, Benton Resources changed it’s name to Alset Energy Corp to reflect management’s new direction and strategy for the company. On May 10th, Alset announced the acquisition of 10 mineral concessions covering 16 known lithium, potassium and boron rich salars, and one mineral concession containing a gypsum zone located in Zacatecas and San Luis Potosi, Mexico.
This triggered a buying stampede into the stock, sending it from under a nickle, to hit 0.80 by the first week of June… a gain of 1400% in less than 3 months for those lucky enough to hang in there from the Benton days. Alset quickly announced a $2 million private placement, priced at 0.38/share (this was repriced for reasons below).
Shortly after locking down the Mexican concessions (May 26th), Alset put together an advisory committee to help guide project development in Mexico. One of the committee members was world renowned geologist, executive, and consultant Tim Oliver, most recently VP Project Development at Lithium-X (LIX). Mr. Oliver reviewed technical documents for the new Mexican lithium salar project and expressed a very positive opinion (shortened for brevity): “”These concessions offer an exciting lithium opportunity. Tests completed by the current owners show the presence of lithium-containing brines in the central Mexican salinas within the concessions….In addition, preliminary inquiries reveal no legal or environmental impediment to construction of solar evaporation ponds. In short, the lithium brine concessions located in the central Mexican Plateau may represent an opportunity to pioneer a new lithium brine production district.”
On August 10th, Mr. Oliver was appointed president of the Company. In the press release, he was gushing with excitement at the prospect of developing Alset’ projects, particularly the Lithium concessions in Mexico. Quote: “”I am thrilled to assume this leadership position at Alset. Given both my passion for the lithium space and my experience operating in Mexico, developing a completely new lithium brine district in the Central Mexican plateau is an exciting prospect.”
From mid-June to the end of September, there was a lull in the flow of news as all the paperwork was being shuffled, documents settled, regulatory issues resolved, etc. In the meantime, investors took their profits and the stock slid from it’s peak of 0.80 to around 0.25 by the end of September.
Then the hammer came down…. and that’s when we said “Hmmmm…”
On October 3rd, the company reported receiving documentation from its Mexican legal counsel, stating that “two of the concessions held under the company’s option agreement, as they are currently registered, may require a considerable amount of annual work expenditures.” Considerable being $1.8 million annually… far above any expectations and budget the company had in mind when they acquired the claims.
This triggered a number of events. 1) The abrupt resignation of Mr. Oliver, 2) A sharp sell-off in the shares of Alset resulting in a loss of 50% on over 9 million shares traded, and 3) the most important (to us, at least), CEO Stephen Stares immediately jumped on the situation by consulting with his Mexican advisors, and came up with a remedial plan to dramatically reduce the annual cost associated to maintaining the concessions.
The full extent of the plan can be read in this news release. In brief, the large size of two concessions within the property package triggered an exponentially higher cost structure. The company, after thorough consultation with legal and technical advisers in Mexico, broke the concessions into smaller sizes, while maintaining the integrity of the whole package. This resulted in reducing annual requirements from $1.8 million to only $292,000! While management intends to spend much more than the minimum requirement, this solution takes away the risk of losing the project due to an excessive minimum spend.
Present Day Opportunity
Amazingly, during all of this drama – the sub 0.05 price of the stock, peaking at 0.80 on massive volume, the downward slide on profit taking and a lull in news, the “shock drop” of 50% on 9 million shares…. the insiders were neither buying or selling, rather holding the positions they have owned for years.
The recent slaughter in share price has forced the company to amend the previously announced private placement. Originally $2 million at 0.38/share, it is now open at $1 million at 0.12/share. The first trance of $207,000 closed today (Oct 14, 2016), and the company believes it has enough funds on hand to cover minimum exploration obligations this year.
Catalysts for Future Growth and Share Profits
With the stock starting to settle around the 0.09 – 0.10 level, we are keeping a close eye out for technical signals in the chart. This may be precipitated by further developments on the Mexican concessions, closing of the full private placement and/or progress on other projects, including further acquisitions.
Disclosure of Interest and Advisory Cautions: At the time of this writing, the author does not hold shares of Alset Energy Corp. Nothing in this report should be construed as a solicitation to buy or sell any securities mentioned. The author of this report is not a registered broker-dealer or financial advisor. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. Never make an investment based solely on what you read in an online or printed report, including this report, especially if the investment involves a small, thinly-traded company that isn’t well known. The author’s views and opinions regarding any publicly traded companies in this report are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. The author of this report does not guarantee the accuracy, completeness, or usefulness of any content of this report, nor its fitness for any particular purpose. Companies mentioned in this report have not reviewed the content of this report prior to publication. Lastly, the author does not guarantee that any of the companies mentioned in the reports will perform as expected, and any comparisons made to other companies may not be valid or come into effect. Please read the entire Disclaimer carefully. By using this report, and whether or not you actually read the Disclaimer, you are deemed to have accepted it. Information provided is educational and general in nature.