Pure Energy Minerals – Avoid This Stock for Now (May 10, 2016)

by FI Fighter on May 10, 2016

in Lithium, Lithium Updates

Pure Energy

Well, you can’t win them all… As I mentioned in past articles and comments, Pure Energy Minerals (PE.V) is a highly speculative junior lithium stock, which is focused on brine solutions in Clayton Valley. Naturally, with Tesla (TSLA) nearby, there’s a lot of appeal with these juniors, and as a speculation, we’re all hoping to find one that will eventually become a major supplier to the Gigafactory.

Unfortunately, the odds of Pure Energy Minerals succeeding in the short-term diminished this morning. The company released some less than inspiring drill results.

PURE ENERGY MINERALS ANNOUNCES RESULTS FROM PHASE 2 DRILL PROGRAM AND PROVIDES UPDATE ON PHASE 3 DRILLING

PURE ENERGY MINERALS ANNOUNCES RESULTS FROM PHASE 2 DRILL PROGRAM AND PROVIDES UPDATE ON PHASE 3 DRILLING 

VANCOUVER, BC–(May 10, 2016 ) – Pure Energy Minerals Limited (TSX VENTURE: PE) (FRANKFURT: A111EG) (OTCQB: HMGLF) (the “Company” or “Pure Energy”) announces the results of well sampling from the phase 2 drill program at its Clayton Valley South (“CVS”) Lithium Brine Project, located near Silver Peak, Nevada (the “Project”). The phase 2 drill program consisted of three wells: CV-4, CV-5, and CV-6, which were major step outs to the south, extending up to 6 kilometres (3.7 miles) beyond the previous limit of drilling. The technical team designed these wells to target lower grade brines of the southern resource area from approximately 150 to 500 metres (500 to 1600 feet) below surface. The results from wells CV-4, 5, and 6 included no significant lithium values, but the data indicate the presence of an active geothermal system that may have a significant impact on fluid compositions in portions of the southern resource area.

Phase 3 drilling continues, as Harris Exploration Drilling has advanced CV-3 to approximately 427 metres (1,400 feet) below surface. The new well was collared approximately 200 metres (660 feet) east-southeast of CV-1; it will serve the dual purpose of a deep exploration well and a monitoring well for future pumping tests. The drillers are using rotary coring techniques to take CV-3 towards a target depth of 490 metres (1,600 feet) below surface, and there are sufficient supplies on site to advance the well deeper if conditions permit. Core recovery has been excellent (>95%) so far, recovering multiple representative sections of core from various aquifers for testing of physical and hydrogeological properties at accredited laboratories.

Patrick Highsmith, Pure Energy Minerals CEO commented, “We now have a better understanding of the basin geology, and the geothermal system we encountered with this drilling in the southern resource area is a complexity. Drilling continues in the northern resource area and the results so far are encouraging. Subject to the completion of our ongoing drill program and updated mineral resource, we anticipate the southern resource area to contract, but due to the low-grade assumptions in that area, it should have a positive impact on the average grade of the estimated inferred resource. If that is the case, we believe higher average grades will bode well for the potential processing economics in the future.”

 

The message is loud and clear… “no significant lithium values“. You can make a press release as lengthy and wordy as you want, but that’s the key takeaway from today’s announcement.

 

Such is the nature of a speculation, especially with an early stage story. Fortunately for myself, this was my smallest lithium position, but a bad pick is a bad pick. I cut my losses after the news release, selling all of my shares, and losing about ~$1,400 in total, exiting out at C$0.61/share. My cost basis was C$0.905/share.

For me, there’s no point in waiting for this story to turn around… There are just so many better alternatives out there right now, so I’m just going to take my lumps and move on. No need to get emotional here, because I’ve always accepted upfront that I’m never going to get every pick right. Obviously, this painful lesson is just another one that helps reaffirm my strong held belief that one ought to focus more on the proven and de-risked stories first before they venture off into the much earlier stage exploration stuff.

For myself, I’m going to uncomplicate matters, and stick primarily with the advanced stage spodumene stories… Irregardless of how Pure Energy Minerals played out for me, I was already starting to learn about how difficult brine projects can be, and more often times than not, things can (and do) go wrong… If you’re going to do it, you’re probably going to need to take the Lithium Americas (LAC.TO) approach, which is to partner with an industry leader like SQM who has the expertise to make sure its done right… Even then, there are no guarantees (ask Orocobre and Toyota), but I’m starting to really understand now why Lithium Americas was willing to sell off 50% of their Cauchari-Olaroz brine project in Argentina to SQM for “only” $25 million.

Anyway, it’s back to Australian spodumene for me… Keep it simple, stupid.

Down the road, yes, I’ll probably keep on speculating on some early stage stories (as I alerted subscribers last night, there’s another early stage story that I particularly like at the moment)… I won’t let this failure deter me, but again, my main focus will be to target after advanced staged projects that have a real legitimate chance of getting into full-scale commercial production sooner rather than later. Out of all of my lithium holdings, Pure Energy Minerals was without a doubt the story farthest away from achieving that goal.

Without a solid foundation in place, no, I shouldn’t go chasing after more “home runs” that have just as great a chance of “striking out”.

 

As always, live and learn.

{ 3 comments… read them below or add one }

1 KurtNo Gravatar May 14, 2016 at 5:00 pm

I also hold GXY and PLS. I got in on these in January this year. I only started reading your blog (off a Hot Copper post link) and have really enjoyed your commentary on lithium. As you know there has been a boom of juniors/specs coming onto the scene in North America and Australia. Fortunately, IMO we have picked the two best stocks on the Aussie market. GXP is ramping up production and has Sal De Vida to develop over the next 2 to 5 years and PLS is very likely to be the next hard rock giant (along with Greenbushes), but importantly a free agent to all the demand side buyers (also online in the next two years). These two have derisked to come extent, so I have avoided investing in specs given these two solid/leader positions – I note DKO got hit last week/Friday, not too unlike Pure Energy – 35% correction. Anyways what are your thoughts on Xped in the IoT space?

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2 FI FighterNo Gravatar May 14, 2016 at 5:35 pm

Kurt,

Thanks for stopping by! Glad to have some Australian investors on board here, so welcome.

I’m with you there, and feel convinced that GXY and PLS are two of the top lithium stocks out there right now. I’m looking forward to the next PLS update, as who knows, maybe Pilgangoora will surpass Greenbushes in size?

Sal De Vida is most exciting, when it comes to brine projects, which is why I’m dumbfounded that I even decided to take a flyer on Pure Energy Minerals when there were so many better alternatives out there. I strongly doubt that any Clayton Valley explorer is going to be able to prove up a resource anywhere near close to the quality and scale of Sal De Vida.

In regards to Xped and tech, in general, I’m not a big investor in that space. I worked as an engineer, love tech, but I just have too many reservations about it to invest heavily. I love mining b/c it’s so straight-forward to understand… A company either has the raw materials or they don’t… When raw materials are in demand, the stocks should do very well… With high-tech, I’m just always worried about another company arriving onto the scene seemingly overnight to change the game yet again… I know that it takes 5-10+ years from exploration discovery to full-scale commercial production… So, you can’t alter the mining space as a new player for many years… In tech, you can re-write the rules overnight…

Best wishes!

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3 Conor McGregorNo Gravatar October 11, 2016 at 8:52 am

Hey,

I’m currently holding PE but wondering if CRE is a much better play. What do you think about the prospects of PE?

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