Two days before Alex Walsh was appointed as CEO the opening share price of Lithium Exploration Group (OTCBB: LEXG) was 0.12, less than a month later those shares closed at 3.90. While the meteoric rise has been a huge payday for some it has others seriously questioning what has warranted such a spike. A company that has never generated revenue and is nowhere near development of resource properties would have to be working on something pretty special to warrant such activity but trying to find that information on LEXG is like looking for a needle in a haystack and there’s no guarantee that the needle even exists.
As a trader in penny stocks one might find the recent activity of LEXG as a prime example of how quick money can be obtained yet if that money is kept in the company as an investment it could all be gone in a matter of days. There is simply no justification for what LEXG has managed to do over the course of a month, especially when you’re talking about a company that has designs on becoming a major player in the lithium exploration industry.
LEXG is a company that has no revenue and has been in the exploration stage since its formation in May 2006 under the name Mariposa Resources, Ltd. Changing its name to Lithium Energy Group, Inc. by way of a merger in November 2010 has done little to advance the company out of that exploration stage and understanding how expensive and time-consuming advancing lithium mining to the production stage is, it’s not likely that the company will get any closer any time soon.
It doesn’t help that LEXG has one full time employee, Walsh, whose Economics & Management degree doesn’t necessarily qualify him as an expert in mining. What LEXG does say of Walsh is that is “a seasoned professional with extensive experience in raising capital and forming strategic partnerships for young operating companies.” Additionally, “Walsh has helped clients in a variety of industries expand their reach regionally, nationally and internationally.”
What that means is that he may be able to raise some money but that doesn’t mean that money is going to advance the stated goals of a company. Much has been written about LEXG as a “pump and dump” and whether that is true or not the evidence appears to support the belief that nothing concrete has occurred to send shares from 0.12 on trading volume around the 1.5 million mark to 3.90 on trading volume in excess of 12 million.
LEXG has been pushing their mineral rights properties in Western Alberta, Canada and South America, touting them as properties of potential lithium brines and other precious metals that demonstrate high probability for near-term production. Potential can be a dangerous word that companies frequently use to raise money and in this case LEXG may be going to the well one too many times.
Back in late March the company announced that their property in Canada contained “a number of wells that AGS (Alberta Geological Survey) tests revealed to contain economically viable levels of lithium.” Speaking about the property Walsh commented “It certainly is an advantage as an exploration company to acquire a property that has already had more than 30 years of successful exploration work completed by a government agency. Alberta is a mining- and exploration-friendly province, and has all of the resources and infrastructure that we will need to move this asset forward.”
Throughout April, when LEXG was being heavily promoted, this information was being used regularly as a selling point for the stock. Sure things changed a bit here and there in the press releases but there was nothing substantial that indicated the company was any closer to actually realizing revenue, it was all a matter of saying the same thing over and over, samples are being taken and meetings are being held, and of course Walsh stating “this property has huge potential.”
Whether the property has potential or not seems to be secondary, the question is does LEXG have the ability to provide investors with a consistent return. It may well be that the traders have taken their money on LEXG and are leaving it to fall as the share price has dipped on Monday and trading volume, while still impressive, has fallen from Friday’s level. LEXG was clearly a play for those banking on the promotion but for investors who are looking for a company that is serious about growing this has never been a safe bet.