When a public resource company disavows half a year of assays after market close, you know it’s going to be a wild ride in the morning. American Lithium Corp. (LI.V) had published results on Aug. 11, Oct. 12 and Nov. 3 on their Fish Lake property in southwest Nevada’s Esmeralda County. Yesterday, the company announced it had learned the assays were overstated. Right in the middle of a financing.
Florin Analytical Services had conducted those multi-element assays, which showed decent values that the company traded on and used to make future plans.
From the company news release:
The assays were completed by Inductively-Coupled Plasma-Atomic Emission Spectrometer (ICP-AES) except for lithium. On the basis of discussions with Florin, Lithium was assayed by Atomic Absorption Spectrophotometer (AAS) as the assayer at Florin felt the AAS method would produce a slightly more accurate result for Lithium.
The assayer was wrong. When the American Lithium Qualified Person, Michael Collins P.Geo, compared the results to historic data, he found the later round to be inflated, so double checked the results with another company.
The Company engaged ALS Minerals to have the assay samples prepped at ALS facilities in Reno, Nevada; and the check assays performed at ALS laboratories in North Vancouver, BC using ICP-AES. The ICP-AES method was chosen because of concerns that the AAS method may be biased by the high salt concentration in brine samples.
At no time was the Company or the Company’s QP aware that Florin had assayed the samples of Lithium by ICP-AES and hence, that there were significantly different values that had not been reported. At this point the Company advises that the 2016 assays reported to date from the Fish Lake Lithium project should not be relied on.
This is the last thing a resource company wants to deal with, especially when they’re in the midst of a raise. The price per share on that raise has been duly lowered, which may well have caught the oncoming plummet and guided it to a place of relative calm.
As announced on November 16, 2016, the Company is undertaking a non-brokered private placement for gross proceeds of $3,000,000. The terms of that private placement have been revised. The Company will place up to 13,400,000 Units at a price of $0.225 per Unit.
“While we are disappointed to uncover errors in the laboratory process, we are relieved that the checks in the Company and the QP put in place were able to catch the errors in the early stages of the project,” Chief Operating Officer Michael Kobler said in a release. “To date, the results reported have only included the Company’s near-surface brine samples. In January, we intend to resume our deep-drilling program as previously announced.”
LI.V’s stock price obviously plummeted from Thursday’s close of $0.30; it had peaked in early June at $1.57. Today? $0.24, just above that private placement mark.
All things considered, though the misstated results are a black eye for the company, it may well have done an admirable job first catching the problem, then admitting the problem, and then salvaging things on the price side.
— Bo Ramone
Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.