House Mountain Partners

Lithium

The Only Question That Matters In Mining Investment Today

Chris BerryComment

By Chris Berry (@cberry1)

For a PDF version of this note, please click here

 

This note will be shorter than usual as my travel schedule seems to have gotten the best of me. I recently returned from Costa Rica and am off to Europe tomorrow with Zimtu Capital to join them in Frankfurt (Nov 6th), Munich (Nov 8th), Zurich (Nov 10th), and Geneva (Nov 12th) as a keynote speaker on their annual bus tour. If you’d like to attend any of the presentations (numerous TSXV and CSX companies will be presenting as well) please let me know and I can get your name on the invite list.

 

The recent swoon in the metals markets likely has all of us questioning our faith and resolve. Personally, I see no reason why gold and silver, in particular, can’t go much lower and stay there indefinitely. Ultimately, supply and demand always equilibrate, but it can be painful waiting for this to happen. The perception of increasing economic strength in the US with a recent 3.5% GDP growth print plus continued US Dollar strength are outweighing the continued reports of gold and silver consumption in the Emerging World. 

What Tesla's Gigafactory Means for the Juniors

Chris Berry
  • Tesla Motors (TSLA:NYSE) recent announcement to build its own vertically integrated lithium ion battery factory (dubbed the Gigafactory) sent the share prices of many junior mining companies into the stratosphere

  • There are a number of questions to consider behind TSLA’s strategy, but with respect to the junior mining sector, one wonders if this is a lifeline or a false dawn

  • Though lithium and graphite plays have benefited the most from the TSLA announcement, there are a host of metals which will be required to manufacture the specific battery chemistry

  •  It was interesting to note that cobalt or nickel plays didn’t react in the same way lithium plays did after the announcement

  •  It is dangerous for a junior mining company (or an investor) to assume that a major manufacturer like TSLA will rely on a junior not yet in production to feed the eventual Gigafactory supply chain

  • The success or failure of the Gigafactory rests less with a secure supply of raw materials and more with the long term price of a gallon of gas