Disruptive Discoveries Journal

A Strategic Shift in an Increasingly Tight Lithium Space

Chris Berry2 Comments

By Chris Berry (@cberry1)

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$80 Million Deal Between Western Lithium and Lithium Americas Redefines the Junior End of the Lithium Market

On an otherwise quiet holiday week in North America for mining, the news of the effective merger between Western Lithium (WLC:TSX, WLCDF:OTCBB) and Lithium Americas (LAC:TSX, LHMAF:OTCBB) is an exciting and positive catalyst in the lithium space. I have maintained for some time that, despite the rosy demand growth projections for lithium, the market needs fewer players. The lithium market (at approximately 160,000 tpy of lithium carbonate equivalent) just isn’t big enough for numerous players to generate adequate cash flows (and hence returns). Further, the resulting players will need to demonstrate costs or competitive advantages that allow them to exist alongside the oligopoly in the space.

China, Minor Metals, and Supply Chains Over The Next Five Years

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By Chris Berry (@cberry1)

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China Repositions 

With attention focused on Greece and the brinksmanship on display, it was refreshing last week to focus on another topic and participate in a roundtable discussion on the development path for China and its minor metals business over the next five years. The seminar, held in New York and hosted by TREM and MMTA (two important think tanks focused on the strategic metals space), hosted numerous individuals across metals value chains, from traders, to strategists, to trade lawyers to investment professionals. I participated as a panelist with a group emceed by Clint Cox, founder of The Anchor House, an exceptional think tank on rare earth element matters.

 

What We Found Out

The seminar was more “macro” in substance and was a refreshing change from the typical conference where you’re pitched by a litany of REE juniors all trying to prove their worth. The conference centered on the methods China’s leaders are employing to build sustainable domestic supply chains and evolve China’s manufacturing base.

Confronting Dislocation in the Graphite Market

Chris Berry5 Comments

Co-authored by Chris Berry and Jonathan Lee

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It’s been awhile since I’ve commented on the graphite capital markets. Financing difficulties, slack demand, economic uncertainty, and investor apathy (issues facing much of the commodity complex) are also at play in the graphite space. Nevertheless, graphite will remain an important piece of current and next generation supply chains and so a sober look at the sector is warranted.

In order to take a “deeper” analytical dive, I’ve asked Jonathan Lee, an institutional mining analyst and President of JGL Partners, to assist with this piece. Investors have shied away from the niche products like graphite due to opaque pricing and the transactional nature of the business. With no futures market, price discovery is tantamount to guess work unless you are in the business. This is generally true across the value chain from juniors to integrated producers.

The Key To The Way Forward In The Mining Sector

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By Chris Berry (@cberry1)

 

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·       The mining sector remains challenged by multiple headwinds including a lack of investment, currency headwinds, slower productivity, excess capacity, and deficient global demand.

·       Debt overhangs and slowing emerging markets – specifically China – appear to be the culprits behind slack demand. These forces must be reckoned with.

·       Longer-term, however, innovation, sustainability, and urbanization are legitimate drivers of growth and help promulgate “good” deflation which enhances productivity and can drive returns.

·       This note examines these phenomena and which sector(s) of the mining industry may benefit.

 

Groundhog Day

After three-plus years of a dismal mining investment environment and the potential for it to continue for some time, a number of questions arise from the soul searching many of us have done to try and make sense of this. According to Bloomberg, the value of the TSXV has fallen from its peak by almost 72%. This market environment necessitates a different method of thinking and evaluation about publicly traded mining companies. The good news is that it appears that many metals prices have bottomed, though this doesn’t mean that the cycle has definitively turned. The bad news is that the global economy still appears to be struggling with excess capacity AND muted demand. China, the seemingly endless engine of metals demand is unquestionably altering its paradigm for economic growth from one of infrastructure build out and exports to one more focused on internal consumption. With China’s debt to GDP ratio of 282% according to McKinsey, this move to a new growth model is absolutely necessary to maintain a sustainable growth rate, but there is no overnight fix to achieve this type of change. The success of this transition won’t be known for years, though the effects are already being felt.

What's Not Being Said Amidst the Lithium Ion Battery Hype (Hint: It's a Double Edged Sword)

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By Chris Berry (@cberry1)

 

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Amid the Tesla-infused hype surrounding batteries a number of truths have become evident.

 First, battery costs are falling – fast. The overall cost of a lithium ion battery has fallen by over 90% since its commercial introduction in 1990 and the CAGR in the price decrease in recent years per kilowatt hour (kWh) is roughly 14%. Should this rate of decline continue, electric vehicles should be able to compete on total cost of ownership (TCO) with traditional internal combustion engine vehicles within five years. 

Cobalt: The Great Enabler

Chris BerryComment

Originally published on April 15, 2015

 

By Chris Berry (@cberry1)

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With an increasing amount of attention focused on metals used in technology, several issues have become clear. First, some are more important than others. Second, the amount of a metal used in an application isn’t as important as is the cost to procure it. Third, a general lack of transparency in pricing clouds the overall potential opportunities.

Given these challenges, it’s a wonder anyone would care at all about the Energy Metals, but it has become increasingly clear that the demand is there. One metal in particular which offers interesting answers to the above issues and deserves more careful study is cobalt. 

Lithium Extraction Technology: Last Best Hope or a False Dawn?

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By Chris Berry (@cberry1)

 

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As the commodities markets continue to struggle, I’ve been outspoken for some time now on the need for companies across the entire value chain to focus on ways to lower costs to remain competitive. While Selling, General, and Administrative (S,G,&A) expenses are likely the easiest places to start “cutting to the bone”, there is a limit here. Having a top tier deposit and great management team is no longer enough when you look at the supply gluts for many of the metals mentioned frequently in our regular commentary.

For an aspiring junior mining company to join the ranks of producers in the lithium space, for example, the project will either need to match or beat the financial metrics of the majors. 

Scandium International Mining Corp. Breaks Ahead of the Pack

Chris Berry1 Comment

By Chris Berry (@cberry1)

 

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Could it be that we’re starting to see some signs of life in pockets of the metals space? One such pocket involves scandium, a metal which I have written favorably on many times in recent years. The size of the global market (possibly 10 to 15 tonnes – about $40,000,000) and number of players (fewer than five) has kept investor interest at bay and really led to the chicken and egg problem I’ve discussed.

Fortunately, that may be changing. Recently, I’ve written about a few potential survival strategies for junior mining companies looking to survive what could be a few more years of sideways to down markets. These include embracing technology to lower operating expenditures or creating your own high tech value chain.