Disruptive Discoveries Journal

Lithium Q1 2017 Review and Risks - The Train Keeps a Rollin'

Chris Berry2 Comments

By Chris Berry (@cberry1)

 

As I’ve discussed before, all commodities are cyclical and the Energy Metals are no exception. Anecdotal evidence suggests that battery grade lithium pricing remains healthy in the $14,000/t USD range even as lithium share price returns have moderated from their triple digit returns in 2016. Despite this, lithium shares continue to post impressive gains. Year to date in 2017, an equally weighted basket of lithium names I track has returned 45.1%. This is compared to a return of 5.98% for the SPX, 2.42% for the TSX, and 4.07% for the ASX.  

Here are the year-to-date returns for select lithium names sorted by USD market cap:

Lithium in 2017: Quacking Ducks, Execution, and Continuation of the Secular Bull

Chris Berry1 Comment

By Chris Berry (@cberry1)

 

There is a famous phrase in resource investing:

“When the ducks are quacking, you feed them.”

The “ducks”, of course are the investment community and the “feeders” here are the companies with shares for sale.

In 2016, the ducks quacked loud and continually for lithium, and rightfully so. The price of lithium chemicals rose dramatically and almost all publicly traded lithium juniors rose as well with some well into the triple digits. Other than zinc or iron ore, lithium was a star performer in 2016.

As I said in June, managing risk and profit taking in the face of lithium’s impressive strength and secular bull market seemed to be the prudent strategy. My warning turned out to be accurate as many of the high flyers in the lithium space ran out of steam.

Unicorns Vs. Dinosaurs - Who Wins in the Debate Over Growth Versus Profitability

Chris BerryComment

By Chris Berry (@cberry1)

For a PDF of this note, please click here.

Ed. Note: This piece was originally submitted to Benchmark Mineral Intelligence in late August 2016 which may explain why some of the data is off. It was recently officially published in their magazine which is why I am now putting it on this site.

 

 

“Getting to profitability is the only way to build a sustainable business…”

-UBER CEO Travis Kalanick in response to UBER’s merger with Didi Chuxing

 

As convergence across industries continues apace and business models evolve, Mr. Kalanick’s statement above is a reminder to investors in early stage companies. As startups across various industries attain unicorn status – a valuation of at least USD $1 billion - the argument around growth at all costs versus profitability has become louder. There are over 170 unicorns in existence today, so the hunt for the “next big thing” is indeed on. With an abundance of cheap capital looking for yield, many investors appear to have set aside a preference for profitability in favor of parabolic growth. Here are the 20 largest unicorns (all privately held): 

 

Strategic Overview of the Cobalt Market

Chris BerryComment

It's been a busy few months and I'm pleased to announce that I've completed a thorough review of the cobalt market which is available for purchase. 

The report covers all aspects of the cobalt supply chain from mining, to refining, to end uses with supply and demand forecasts as well. 

I'm offering the Executive Summary and a portion of the Introduction for free. You can download a PDF version here. The cost of the full report is $500 USD which can be paid through PayPal (or we can make arrangements for a wire if necessary). As an added bonus, I'll give the first 20 people to purchase the report an opportunity for a 20 minute phone call to ask any question they want regarding the outlook for the cobalt market. 

To be clear, this is not a "stockpicking" report and so you won't find any "flavor of the month" stock picks here. What you will find is in depth data and insights into the cobalt supply chain and how the companies along it are shifting their business to capture the anticipated high growth of downstream industries. 

For more info on purchasing the report, please email me at info@house-mountain.com.

Thanks,

Chris

Lithium in Las Vegas: A Closer Look at the Lithium Bull

Chris Berry3 Comments

By Chris Berry (@cberry1)

 For a PDF of this note, please click here

 

I'm just back and recovering from a week in Las Vegas where the 8th Annual Lithium Supply and Markets Conference hosted by Metal Bulletin took place. Sentiment in the industry is overwhelmingly positive as the ubiquity of technology and the cost deflation associated with that technology (EVs, consumer electronics) means that lithium ion battery chemistry will remain central to this growth. The event was attended by  major lithium producers including Albemarle (ALB:NYSE), SQM (SQM:NYSE), and FMC (FMC:NYSE), cathode manufacturers, investment professionals, and junior mining companies, so coming away with a clear view of the market was facilitated.

It looks like my demand estimates of ~270,000 tonnes LCE by 2020 will be met. Supply, on the other hand, is always a wild card in the mining sector and my proprietary estimates

Mike's Presentation to the NY Chapter of the SME: "The Revival of Natural Resources - Inflation or Deflation

Chris Berry2 Comments

Recently Mike delivered a presentation to the New York Chapter of the SME which takes a renewed look at the inflation/deflation debate and its effects on natural resources. He tackles topics such as negative interest rates, "helicopter drops", Central Banker potential to reignite growth, currency implications, some preferred commodities, and most importantly the verdict which calls for deflationary forces to predominate before inflation, again, rears its ugly head. 

In either event, gold and silver should benefit from the forthcoming extraordinary central banking programs to stimulate escape velocity growth and hit the Feds long sought inflation target. He argues that diversification into gold and silver exposure is an appropriate risk management investment policy. 

 

Click here for a copy. 

China Outflanks Freeport To Further Consolidate The Lithium Ion Battery Business

Chris BerryComment

By Chris Berry (@cberry1)

For a PDF version of this note, please click here.

 

 

Earlier this week, the deal in which China Molybdenum Co. (603993:SHA) agreed to pay Freeport McMoRan (FCX:NYSE) $2.65 billion for FCX’s African copper assets reaffirms our view that asset shedding from the FCX project portfolio must continue (See the press release here).

FCX, with a $13B market capitalization, made a bad bet in diversifying into the oil business at the cyclical peak and now must reckon with roughly $20B in debt on their balance sheet. The debt maturity profile of the company is shown below: