International Battery Metals: Overinflated and Precariously Underfunded

  • International Battery Metals (IBAT) professes development of a revolutionary lithium extraction technology joining a sea of start-ups telling similar stories
  • Despite just completing test facility construction and reporting limited, “high-level” testing, IBAT has a market capitalization of $450m, up 110x over two years
  • IBAT calls CEO John Burba the “Godfather of Lithium”, a title apparently self-appointed, and one we find at odds with Burba’s history in mineral start-ups
  • Burba was CTO at MolyCorp, a mining operation with an oversold mineral extraction technology that ended in an SEC investigation and bankruptcy five years after its IPO
  • Next, Burba was CEO at Simbol, a heavily promoted lithium extraction operation that ended in receivership, its technology sold off for $1m
  • IBAT has less than two quarters of cash, $20m in debt and negative working capital of $16m
  • IBAT is attempting a highly dilutive equity for debt transaction indicating a low-value technology reliant on usurious capital
  • IBAT’s two largest shareholders with 40% of outstanding shares have sold nearly 30% of their stakes this year in private transactions
  • Recognized lithium expert is skeptical of IBAT’s claims given the complexity of matching DLE technology to brine source and difficulty of successfully operating at scale

Disclosure: We are short International Battery Metals. Please see full disclaimer at bottom of report.

October 26, 2022 — We are short International Battery Metals (CSE:IBAT), a Canada-based developer of lithium extraction technology led by a CEO whose two previous mineral extraction ventures wiped out shareholders. IBAT shares have been swept higher by glowing projections from management and widespread enthusiasm for EV-associated battery metals: in the last two years IBAT’s market capitalization is up 110x to $450m (all figures in CAD), gratuitous considering IBAT has yet to show that it’s mobile direct lithium extraction (DLE) technology works at pilot scale.

The start-up track record of CEO Dr. John Burba does not inspire confidence. While IBAT calls Burba “The Godfather of Lithium” (a title we have not been able to confirm was not self-anointed), immediately prior to IBAT he led two high-profile mineral extraction failures. Burba served as CTO of MolyCorp, a rare earth mineral excavator that advertised analogous claims of economically attractive mineral production powered by proprietary technology but went bankrupt, and as CEO of Simbol Materials, another DLE start-up with ambitious plans to revolutionize lithium extraction in the Salton Sea which ended in receivership.

IBAT is likely to follow a similar path in our view, as we expect its supposed mobile extraction prowess will fail when applied at commercial scale. Expectations of sustained lithium demand to satisfy the growth in electrical vehicle production has led to a wave of capital into the lithium sector. However, only a handful of new extraction technologies will succeed, and we don’t think IBAT will be among them based on our opinion that it lacks an established partner and a credible management team. We think the stock’s $450m market capitalization is implying excessive optimism, particularly considering IBAT’s thin balance sheet.

IBAT has struggled to find respectable funding, a clue that experts lack confidence in what IBAT is selling. The company’s licensee and largest shareholders are obscure entities with little or no background in the space invested 95% below current prices. IBAT owes $20m in debt to these shareholders and with only $4m cash as of the second quarter (approximately two quarters of burn), IBAT needs to raise substantial cash in the near term.

MolyCorp: Burba’s Highly Touted Mineral Extraction Venture Ends in SEC Investigation and Bankruptcy

CEO Burba has worked in lithium extraction for most of his career at industrials including Dow Chemical, FMC, and Chevron Mining. In 2008 Burba became Chief Technology Officer at MolyCorp, a rare earth miner at the time owned by Chevron and in 2009 he was appointed Executive Vice President.

MolyCorp went public in 2010 raising $400m with plans to reactivate a large but dormant mine in Southern California. The mining operation claimed – in the same vein as IBAT – its superior technology would lower the costs and environmental impact of mineral extraction compared to standard methods. Within four months of the IPO MolyCorp shares tripled reaching a market capitalization of $6b.

However, MolyCorp consistently missed production targets and underestimated costs. In 2012 the SEC investigated the company over the accuracy of its disclosures. MolyCorp’s CEO resigned the following month, and Burba left three months later. In 2015 MolyCorp filed for bankruptcy protection.

MolyCorp 5.5 2014 Convertible Bonds


Despite the operational problems management maintained a confident outlook as detailed in investor class action lawsuits. In Armstrong v. MolyCorp, 2014, former employees allege management and specifically Burba perpetuated a misleading confidence even though operations lagged expectations.

A MolyCorp engineer alleged Burba focused on meeting target numbers over proper processes:

Armstrong v. MolyCorp, 2014

The engineer described how a critical mineral leaching system under Burba’s purview failed to work, yet MolyCorp built it anyway before conducting adequate diligence:

Armstrong v. MolyCorp, 2014

According to a MolyCorp Production Supervisor, Burba and CEO Mark Smith failed to adequately convey the engineering issues to investors, instead representing progress according to plan:

Armstrong v. MolyCorp, 2014

The lawsuit was eventually dismissed as it was ruled management did not purposefully mislead investors. However, the promotional statements and projections made by MolyCorp management including Burba were not disputed – defense lawyers called them “corporate optimism” and “puffery”. We think investors should consider this history when assessing Burba’s claims at IBAT.

Simbol Materials: Another Hyped Lithium Extraction Venture, Another Shareholder Wipeout

Burba next served as CEO of Simbol Materials between 2013 and 2015. IBAT stock promotion articles point to Simbol and its unconsummated buyout offer from Tesla as evidence of the company’s value. But Simbol, like MolyCorp, ended in total losses for shareholders.

The hype surrounding Simbol was nearly interchangeable with IBAT’s story: Simbol purportedly developed a cost efficient and environmentally conscious lithium extraction technology which generated considerable excitement even though it was unproven at commercial scale.

In 2014 Tesla, looking for a lithium source for its then under construction Gigafactory 1 plant in Nevada, offered to buy Simbol for $325m. The bid turned out to be a head fake, falling apart for numerous reasons including a Simbol counteroffer nearly 5x Tesla’s original bid.

Another reason: the technology failed to work at commercial scale. According to the CEO of EnergySource, a geothermal energy producer which at the time was partnered with Simbol, the start-up’s extraction method did not properly filter brine before processing it for lithium removal which caused issues:

There was a key step in the process that Simbol was trying not to do because it was expensive. And their demonstration plant, for that reason, never really operated continuously very well.” – Eric Spomer, CEO EnergySource

Spomer noted that even though the process never worked at commercial scale, a member of Simbol’s management nevertheless patented it:

One of their principles just patented everything you could think of.

We suspect Spomer is referring to Burba, who advertises a “directory” of 80 patents on IBAT’s website.

Simbol was ultimately unable to attract sufficient investment and entered receivership in 2015 under which its IP was bought for approximately $1m. The patents have been traded between obscure DLE operators since.

IBAT Claims “Validation” of Extraction Technology, But Disclosed Data is Limited

In September, IBAT touted test results of its mobile DLE plant, reporting a lithium extraction rate of “more than 65%” and recycling of 94% wastewater. IBAT called the results a “step-change” in lithium extraction. But the testing was extremely narrow, conducted on three extraction cycles over three days in August. By IBAT’s own admission, this was a “high-level due diligence review”. Moreover, IBAT’s extraction rate is unremarkable compared to other DLE operations which claim 70% to 90% rates.

University of Technology Sydney

Investors should be aware that IBAT faces considerable competition in DLE. Jade Cove Partners, a lithium-focused consultancy, is tracking at least 70 DLE methods and according to a Jade Cove principal, “some major lithium producers are tracking hundreds of technologies” [15:00]. Experts think only a handful will survive. According to David Deak, President of Marbex, a battery metal consultancy, only “one, maybe two types of different DLE platforms” will be operating by 2030 [30:30].

Funded By Obscure, Troubling Counterparties

According to a March 2018 promotional article (for which IBAT paid $90k), Robert Hillis Miller was one of the company’s early financiers (Miller’s LinkedIn profile lists him as CEO of Battery Metals Inc in 2016 – it’s not clear if this is the same entity as IBAT).

Miller is a former Vancouver-based broker who the SEC charged with securities fraud and disclosure violations in 2019. The SEC is accusing him of improperly selling $1.4m of stock in unregistered sales of ABAKAN, a company he founded and led as CEO which developed “nano-composite coatings”. The SEC alleges:

The funds were used to prop up Abakan’s struggling business, which never generated significant revenue, including paying Abakan’s vendors and employees such as Miller himself.

IBAT has primarily been funded by two entities: Ensorcia Metals which is led by CEO Daniel Layton, an energy executive affiliated with obscure energy and power related entities, and EVL Holdings, a Louisiana-based LLC set up roughly one month prior to investing in a November 2020 IBAT private placement.

In 2018 IBAT licensed its extraction technology to Ensorcia in exchange for a 6% royalty on netback sales (sales minus COGS) and a 10% interest in Ensorcia, but no cash. Ensorcia was granted two-year warrants at $0.163.

Ensorcia purchased 34m shares in three private placements during 2020 and 2021 at an average price of $0.12 for a total cash outlay of $4m. EVL participated in one private placement in 2020, purchasing 25m shares at $0.10 for $2.5m. Ensorcia and EVL are considered IBAT insiders as both own over 10% of outstanding IBAT shares.

In February, Ensorcia and EVL began selling significant amounts of IBAT stock in private transactions. Ensorcia sold 5.9m shares at $0.64 and EVL sold 10m shares at an average price of $2.3. IBAT trading volume is relatively minute so it’s unclear how these sales were transacted. We asked management for further information but have not heard back at the time of publishing.


IBAT Is Attempting to Settle $11m in Debt with Equity and Warrants at a 90% Discount

Ensorcia and EVL have also funded IBAT through payments on the company’s behalf which are accrued under trade payables. As of the end of July, Ensorcia and EVL are due $9m and $10m respectively.

IBAT attempted to settle the debts by offering Ensorcia and EVL shares and warrants in May under the terms of a private placement approved in 2021 priced at $0.58. The swap would exchange $11m in liabilities for 17.3m shares plus 17.3m two-year warrants. At a share price of $3.5, the equity and warrants are worth at least $110m, or 10x the amount owed to Ensorcia and EVL.

Annual statement for year ended January 31, 2022

Financing under terms offering such extreme benefit to insiders at the expense of non-insider shareholders is concerning. Moreover, it’s a clue that IBAT’s DLE tech isn’t well-regarded by industry experts and credible investors.

In September, IBAT disclosed the Canadian Securities Exchange required written confirmation from 50.1% of disinterested shareholders to approve this debt settlement. Considering the massive price discount, we think it’s unlikely IBAT will get such confirmation. If not, IBAT, with only $4m or less than two quarter of cash, will likely conduct another dilutive offering with warrants and it’s hard to imagine it pricing anywhere near the current stock price.

We asked management for more information on Ensorcia and EVL and how it plans to settle the $19m it owes to both if the debt for equity exchange is not approved. We have received no response at time of publishing.

Leading Lithium Industry Expert Skeptical of IBAT’s Claims: “I Wouldn’t Touch IBAT Stock”

We  engaged one of the world’s leading lithium industry experts for his views on IBAT. The expert has over 25 years of international industry experience, working in senior roles with some of the industry’s largest producers. He is a former colleague of Burba and advises governments, suppliers, lithium-ion battery producers, and investors.

We asked the expert to discuss IBAT’s technology in general and its chances of success. He expressed skepticism and his view that Burba has a tendency for exaggeration:

If you listen to him talk about [IBAT’s technology], there’s a lot of generality and little to no specifics. What bothers me is that he compares it to the Atacama (largest salt flat in Chile), but he mischaracterizes the use and the water in the Atacama – which is common amongst junior miners seeking to attract investors.

John isn’t solving a problem and if they operate on the Atacama, he talks about how he wouldn’t use the water and how they would use their lithium brine and back haul fresh water that’s converted from sea water, but he doesn’t tell you how he will do that.

I like John but he’s prone to exaggeration – I’m not saying that technology doesn’t work, but it just hasn’t been proven.

When we asked the expert to address IBAT’s claims regarding water efficiency and capital requirements, he had doubts:

John made the claim that 98% of the water is recycled, we will see if that is actually true. He claims he can make these modular units that produce 5000 tons for $25M which I don’t believe for a minute.

Specifically, the expert highlights the substantial time and costs of establishing a properly functioning lithium extraction plant. He suspects Burba is underestimating both:

He’s saying that he can make a modular unit that does 5000 tons for $25m, he might be able to fabricate the pieces, but establishing it in Argentina is much more capitally intensive. I don’t believe it; if he can actually do what he said then people would be chasing it.

When you’re constructing these plants, and considering the way inflation has affected these materials, then then I would be surprised if he could even do it for $50-$100M. [We note IBAT has under $4m in cash].

The expert had not heard of IBAT’s partner Ensorcia. He also told us IBAT is not mentioned in discussions of DLE competitors:

No, I had never heard of him… When I first heard from Layton (Ensorcia’s CEO), I never heard of Ensorcia, I asked the person who was in charge of CORFO (Chilean economic development agency), he never heard about it either.

I’m on the board of a DLE start-up and when they talk about competitors, Burba’s name isn’t mentioned – its more Lilac.

The expert also urged caution with respect to DLE in general:

It’s gotta be proven commercially which in my mind it has not been, it’s also not a one size fits all solution, just because it works in Chile doesn’t mean it’ll work in Argentina… DLE is a bespoke situation… its gotta be customized, even if it succeeds in Argentina, it might not work [elsewhere] because it depends on the brine.”

Given his concerns about the technology and Burba’s claims, he is avoiding IBAT stock:

I wouldn’t touch IBAT stock because when you know a guy and you work with him and go through the Simbol thing I would rather work with someone who wants to under promise and overproduce than someone who does the opposite. I bet on people and his propensity to over-exaggerate doesn’t leave me to believe in him.

IBAT marketing materials call Burba, “The Godfather of Lithium”. We were unable to find where the moniker originated, so we asked the expert. He expressed surprise:

I never heard anyone refer to him as that, most people in the lithium industry wouldn’t even have heard of John Burba. I laughed when I heard this, and the first time I heard him being called that was last year.

IBAT website
IBAT website

We asked IBAT for clarification on the nickname but have received no reply at time of publishing.


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