Disruptive Discoveries Journal

lithium ion

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

Chris Berry3 Comments

By Chris Berry (@cberry1)

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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

China Outflanks Freeport To Further Consolidate The Lithium Ion Battery Business

Chris BerryComment

By Chris Berry (@cberry1)

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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:

Another Way to Think About Lithium - The Separator Business

Chris Berry1 Comment

By Chris Berry (@cberry1)

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

 

 

We’ve just returned from PDAC and lithium is all the rage. The specialty chemical’s parabolic price spike has altered the landscape and as I predicted late last year, a crop of juniors has flocked to the space. While this is dangerous and may serve to confuse investors, it doesn’t negate the fact that the lithium demand story is real.

Given the supply tightness, elevated prices for lithium concentrate, lithium carbonate, and lithium hydroxide are going to remain a fact of life for perhaps the next 18 months. The recent binding off-take agreement Galaxy Resources (GXY:ASX) signed for 60,000 tonnes of lithium concentrate at US $600/t (FOB) with 50% of the total order value paid up front in cash ($18 million) is only the latest exciting example of a lithium market taking shape.

All of this brings us back, however, to a question we’ve discussed publicly: as the lithium mining space continues to evolve, how do you play lithium outside of investing in the miners? 

Is it Different This Time? - Separating Hype from Reality in the Lithium Ion Boom

Chris BerryComment

Here is the link for my recent remarks at PDAC regarding how to interpret the lithium market. The presentation is "picture heavy" as I generally hate powerpoint and minimize words in favor of images.

Nonetheless, reach out to me if you'd like a deeper discussion on these issues.

The presentation looks at the reasons why the lithium ion battery is increasingly important in our daily lives and offers a few thoughts on what to look for and avoid as you start to understand an increasingly interesting and pivotal space. 

2016: There's Something in the Air

Chris Berry2 Comments

By Chris Berry (@cberry1)

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

As is the case this time of year, we start to close the books on 2015 and position for 2016. While we have effectively and indefinitely moved “to the sidelines” with respect to stock picking in the junior mining space, there were some notable successes, in particular with the merger between Western Lithium (WLC:TSXV) and Lithium Americas. This combination positions the new company in a unique strategic light as electrification, underpinned by the lithium ion battery, gathers steam in 2016. Galaxy Lithium’s (GXY:ASX) restructuring is another positive development. We’ll be watching the developments with these two companies closely.

In 2015, there was very little to be cheerful about in the metals markets and to be blunt, we expect this malaise to continue into 2016. China’s RMB devaluation last summer...

Tesla Buys an Out of the Money Call Option on Lithium Supply

Chris Berry2 Comments

By Chris Berry (@cberry1)

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It’s been interesting to read the mainstream media’s impression of the recently announced lithium hydroxide supply deal between Tesla Motors (TSLA:NASDAQ) and Rare Earth Minerals PLC (REM:LON) and Bacanora Minerals (BCN:TSXV, BCN:LON), a joint venture with lithium concessions in Mexico. Arguably the biggest misconception is that TSLA has consummated a deal with companies operating an existing mine. This is not the case as the deposit at the center of the agreement is just that – a deposit.  

Semantics aside, the agreement between the companies offers an interesting window into TSLA’s supply chain strategies, and in the end what the company has really done has purchased an out of the money call option on future lithium supply.

Q2 Lithium Results: Full Steam Ahead, but Watch Where You Step

Chris BerryComment

By Chris Berry (@cberry1)

 

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In keeping with tradition, each quarter I take a look at earnings announcements of select companies involved in Energy Metals value chains. Today I look at lithium. The thinking here is that dissecting financial results of companies involved in lithium production or use can give clearer guidance on the narrative of looming electrification (and growing materials demand to underpin this sea change). While it is true that all financials can be twisted or manipulated to spin a story, the ability to analyze financial statements can give reasonable insights into trends of this relatively small but growing business. The devil is always in the details.

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

Chris Berry1 Comment

By Chris Berry (@cberry1)

 

For a PDF copy of this note, please click here

 

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. 

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

Chris BerryComment

By Chris Berry (@cberry1)

 

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

 

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.