Spruce Point Capital Management, LLC (“Spruce Point” or “we” or “us”), a New York-based investment management firm that focuses on forensic research and short-selling, today issued a detailed report entitled, “A Recycled Story By Two Questionable Management Teams LODE’d With Issues,” that outlines why shares of both American Battery Metals Corp. (OTCBB: ABML) (“ABML” or the “Company”) and Comstock Mining Inc. (NYSEAmex: LODE) face up to 90% downside risk. Download or view the report by visiting www.SprucePointCap.com and follow us on Twitter @SprucePointCap for additional information and exclusive updates.
Ben Axler, Spruce Point’s Founder and Chief Investment Officer, commented:
“Booms and busts in stock prices are often greatest in speculative mining and technology plays that tantalize investors with optimistic revenue and profit outlooks, yet often stem from baseless claims and companies with a history of failure. We saw this in 2012 and have a proven record of calling out stock promotions in these sectors, namely Liquidmetal Technologies (OTCBB: LQMT) and US Antimony (AMEX: UAMY). We see extreme parallels between these promoted failures and American Battery Metals Corp. and Comstock Mining Inc. These companies appear to have hitched their wagon to investor enthusiasm for electric vehicle battery recycling, and their prospective plant’s proximity to Tesla and its Gigafactory in Nevada. We recommend investors exercise extreme caution at these extended valuations and urge shareholders to closely examine why we believe both companies are Strong Sells.”
Spruce Point Report Overview
We urge investors to review key findings in Spruce Point’s report and hold management accountable for answers to the following issues:
- We believe optimistic claims for near-term revenues and profits from electric vehicle (“EV”) battery recycling are likely to disappoint long after insiders sell out and share prices correct. After speaking with a renowned expert, we believe the EV battery recycling market will be slow to develop. There’s no existing infrastructure to recycle lithium-ion batteries, only a fraction of EVs are nearing end-of-life, most batteries are repurposed for other applications rather than recycled, and recycling is not currently economical as most key battery materials are not currently in short supply. ABML is making claims it can achieve $200 million of revenue and 78% net margin, while LODE is claiming $100 million of sale and $30 million of profit potential within three years. Our report dissects why investors should be incredibly skeptical of these claims given neither company has outlined exactly where the battery supply will come from, and who the customers will be. In addition, we believe neither management team has any prior experience in the battery recycling industry and is currently relying on recycling processes that have not been proven at commercial scale. In addition, a host of other environmental and regulatory permitting and approvals remain to be addressed.
- A recent Freedom of Information (“FOIA”) request made in Fernley, Nevada contradicts management’s permitting claims. To date, ABML has made a purchase of land in Fernley, but has been slowly walking back its timeline to have a fully operational battery recycling facility. Management recently said it is finalizing its permitting process with the city and that permits are in process. Yet, the City of Fernley, Nevada affirmatively stated that no applications or permits have been submitted to date on the parcel of land owned by ABML. ABML is still in the land entitlement phase.
- We believe both management teams are promotional and have a demonstrated track record of failing investors’ expectations in past business ventures. ABML’s CEO Doug Cole and Director Doug MacLellan have failed to disclose on their respective biographies associations with numerous failed business ventures. Most alarming, CEO Cole was a Director at Longwei Petroleum, an SEC-charged fraud, while Director MacLellan was Vice Chairman at AXM Pharma, a company the SEC issued a cease-and-desist order for financial reporting fraud. Investors should also be alarmed that ABML is using an increasing number of Investor Relations and Consulting firms to promote its story. We believe that not all of these consulting arrangements have been properly disclosed. With respect to LODE, we believe it failed on its gold and silver mining objectives. Investors should be aware that in 10 years as CEO, Corrado de Gasperis has raised $176 million of capital and accumulated $114 million of negative Free Cash Flow. In 2020, ahead of its claims to transition to a “green metal company” and the formation of LiNiCo, we believe red flags such as special bonuses to the CEO, a financial misstatement and identification of a material weakness, auditor dismissal, and a CFO resignation have emerged.
- Conflicts of interest and limited management engagement. Many of ABML’s executives have other business interests that we believe distract from the attention ABML requires. Most notably, we are concerned by ABML’s Chief Resource Officer Scott Jolcover, who is also a “consultant” to LODE and manages “all commercial transactions.” This is concerning given that LODE’s formation of LiNiCo places it in direct competition with ABML’s battery recycling ambitions. It should be noted that we believe Scott Jolcover is related to Jeffrey Jolcover, who was convicted of securities fraud, mail and wire fraud, and money laundering. A local source in Nevada stated that Jeffrey Jolcover works with LODE’s largest shareholder, John Winfield, at D.W.C. Resources. Furthermore, Scott Jolcover is the registered owner of Playmate Ranch and Spa, a legally operated brothel in Mineral County, Nevada. ABML has told investors it expects to “uplist” its shares to a major stock exchange. However, we believe it does not currently qualify and that major exchanges could potentially take issue with the reputational risks associated with this situation.
- We believe investors should brace for up to 90% downside risk as timelines are pushed out, dilutive capital is raised, and profits fail to materialize. ABML currently has a going concern warning, is thinly capitalized, and has raised capital from an entity named Tysadco Partners LLC. We believe this firm is linked to a FINRA-barred investment broker named Robert J. DelVecchio Jr. ABML’s market capitalization is currently in excess of $1.4 billion, despite no revenues and questions surrounding the accuracy of its permitting claims. We believe there is substantial downside risk if it fails to achieve its commercial claims. It should be noted that CEO Doug Cole was selling stock at $0.10 cents per share in 2020, prior to the recent increase in share price. As it relates to LODE, we believe it has failed to deliver on its corporate promises, has a subpar CEO, and has illiquid assets of little productive value. We believe the LiNiCo transaction won’t succeed and that investors should value LODE at a multiple of its cash to reflect going concern. Our price target is approximately $0.35 – $0.70/share.
Please note that the items summarized in this press release are expanded upon and supported with data, public filings and records, and images in Spruce Point’s full report. As a reminder, our full report, along with its investment disclaimers, can be downloaded and viewed at www.SprucePointCap.com.
As disclosed, Spruce Point has a short position in ABML and LODE and owns derivative securities on LODE that stand to net benefit if its share price falls.
About Spruce Point
Spruce Point Capital Management, LLC is a forensic fundamentally-oriented investment manager that focuses on short-selling, value and special situation investment opportunities. Spruce Point Capital Management, LLC is a member of the Financial Industry Regulatory Authority, CRD number 288248.
Spruce Point Capital Management