After releasing a number of beneficial press releases noting company growth and new financing, International Battery Metals Ltd (OTCMKTS:RHHNF) has spiked up in March. While market sentiments have strengthened as people doubled their money on the stock, yet volume has also been remarkable. More than 2 million shares changed hands some days showing that the stock had retained the attention of the market. The following chart shows the epic market reaction:
2 months chart for RHHNF
Currently trading at the $.40 candle, the stock needs to close above the $0.45 mark to again show the momentum and affirm the uptrend. On the downside, a close below the $0.30 mark would be a very bearish sign, as it is seen as a key psychological level. Taking into consideration the recent beneficial news from RHHNF, downward movements are not likely. But, bear in mind that anything can happen with microcap stocks like International Battery Metals Ltd.
Business Profile
International Battery Metals, Inc., headquartered in Vancouver, Canada, is an advanced technology company focused on lithium brine extraction. The company is in the process of creating and applying intellectual property related to lithium extraction from oilfield brines for petrol-lithium extraction projects. RHHNF's unique extraction process is environmentally friendly, low cost, and has the potential to produce high-quality, commercial grade lithium at a much faster rate than the current industry standards.
From the large amount of information that we could find about this company, the following interview with the management is quite illustrative. Please note that John Burba, CEO of RHHNF, gave some hints in this video about the announcements that recently made the stock spike. With this in mind, in the future, we will try to watch his future communications in the financial media:
https://youtu.be/5cIpIIUFoo4
The Agreement with North American Lithium, Inc. and Selective Adsorption Lithium, Inc.
One of the most recent deals signed by International Battery Metals Inc. is the Share Exchange Agreement with North American Lithium, Inc. and Selective Adsorption Lithium, Inc., dated March 4, 2018. According to the agreement, the company acquires a unique technology that will allow the company direct extraction of lithium from complex brines, such as those found in oil fields:
"The SAL technology involves processes that are highly selective for lithium, and an extraction system that allows lithium recovery from complex brines with only minimal pretreatment. Pretreatment of the brine to remove calcium or magnesium is not necessary in the process. The process also inherently rejects sulfate and borate from interfering with the lithium extraction. Once the oil field brine flows into the system, lithium chloride is removed, and the remainder of the brine is injected back into the ground through an environmentally permitted well." Source
Taking into account the positive reaction of the market, the deal seems like a game changer for RHHNF. The new technology is expected to minimize costs by minimizing brine pretreatment and reduced chemical consumption. Additionally, the equipment to be acquired will permit rapid implementation and installation, minimizing the traditional lag time associated with bringing resources online.
How much is it going to cost?
For that only care about the financing of the deal, here are the most important details. The company will pay with 25,309,488 common shares of its own shares:
- 4,700,000 shares on closing of the proposed transaction
- 4,000,000 shares upon SAL and RHHNF completing an agreed upon milestone in respect of the Intellectual Property
- 5,536,496 shares upon SAL and RHHNF completing an additional agreed upon milestone in respect of the Intellectual Property
- 5,536,496 shares upon SAL and RHHNF completing an additional agreed upon milestone in respect of the Intellectual Property
- 5,536,496 shares upon RHHNF (i) completing one or more private placement financing(s) resulting into the issuance of no less than 5,000,000 common shares of RHHNF and (ii) completing a laboratory-scale pilot plant for the processing of lithium or lithium concentrates.
In addition to other customary conditions, also bear in mind that after the closing, Dr. John Burba will be the new president President and Chief Executive Officer of RHHNF. We are talking here about a complete change in management and the business model of the company. In our opinion, that's what the market is celebrating.
When will the transaction close?
That's the question everybody wants to know, as more share price spikes can be expected after the closing. While the company has not given any specific date, on March 22, 2018, the company released that it "has begun finalization of the transaction." This means that it is about to exchange all the required documentation and the closing will be certified in a few weeks. We will stay tuned, as this is the largest catalyst for this name.
Patents
In addition to the cited acquisition, the market also reacted to the filing for patent protection at the U.S. Patent and Trademark Office (USPTO) for its lithium extraction process. It was released on March 20, 2018, exactly when the stock volume commenced to spike up. The management was obviously very optimistic about the deal:
"This filing is the first of many that SAL is working on to protect our third-generation technology as we begin building our intellectual property portfolio and our processing techniques. This work will advance IBAT's competitive leadership in the lithium-extraction arena." Source
Regarding these matters, we see another serious catalyst. The USPTO and the European authorities will revise the documents provided by the company. If the patent is granted, we will be expecting another share price spike. It is another good reason to like this name.
Financing
Both the new management and the lithium industry seem to be seducing market participants. We say this as the company was able to engage Mackie Research Capital Corporation as an agent to sell up to 3,000,000 units at a price of $0.35 per unit for gross proceeds up to $1,050,000. It will be very important to check the result of this offering. If the company is able to receive the expected amount of money, it will prove that the project is trustworthy.
Additionally, on March 27, 2018, the company noted that it intends to apply for a warrant exercise incentive program with the Canadian Securities Exchange. This is what Warrant holders need to know:
"Under the proposed Incentive Program, if the Placement Warrants are exercised prior to 4:00 pm (Vancouver time) on May 16, 2018 (the " Incentive Period"), the Placement Warrant holder will receive one (1) additional warrant (an "Incentive Warrant") in consideration of the early exercise of each Placement Warrant. Each Incentive Warrant will be exercisable to acquire one (1) common share of the Company at a price of $0.75 per share for a period of two (2) years from the date of issuance. The Company believes this will give existing Placement Warrant holders the right incentive to exercise their Placement Warrants." Source
What's our take? As the company is preparing a new business model, it needs money. With this new incentive plan, if investors decide to exercise, they will be providing money to RHHNF. It is brilliant. We believe that if the company can grow thanks to the new financing, it will offset the potential stock dilution created by these transactions.
Current Operations and Conclusion
As said, the transaction has not closed, but we believe that it will do soon. The fact that Selective Adsorption Lithium, Inc. has commenced the laboratory-scale phase of development for its oilfield lithium extraction technology seems to prove this thesis. In addition, the following sentence found in a very recent press release shows that the transaction could close soon:
"The transaction has not closed to date however both parties are now proceeding with completing the remaining documentation to finalize the transaction." Source
Currently trading with a market cap of $12.95 million, RHHNF is an interesting story among small caps. With the transaction about to close and new financing in the works, 2018 seems to be a hot year for the company. We will stay tuned, as the company could surprise soon.
Disclosure: We have no position in RHHNF and have not been compensated for this article.
Image courtesy of fdecomite via Flickr.
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