By Chris Berry and Alex Grant
Livent’s announcement last week that they would invest in E3 Metals Corp. of Alberta, Canada to help develop the company’s direct lithium extraction (DLE) technology was a major signal to the industry that new technologies can play an important role in meeting future lithium demand for batteries. Traditionally, financial capital in the mining exploration sector has chased unproductive assets as commodity prices have risen, only to be squandered when those same prices mean revert. Is there perhaps a new model or funding mechanism available to add to lithium supply?
We share the belief that new technologies are key to future lithium supply and here we’ll share some of the ideas from our recent conversations on the topic. For context, Alex co-founded Lilac Solutions, a DLE technology company, and now advises on technology strategy/flowsheet development for several lithium project developers. Chris is a prominent minerals market analyst who provides corporate strategy and advisory services to investors and companies along the lithium ion supply chain. We both spend our days focused on how macroeconomic and technological forces affect the lithium industry from different angles, and we hope this article provides some actionable insight for project developers, investors, and other industry players.
What follows is an abbreviated version of the most salient points from the recent lithium conference in Montreal with some context added. The full and more complete version was sent out to clients earlier this week.
· Attendance has risen by 100% each of the last three years with this year being the most diverse across the lithium supply chain. While upstream players were the most widely represented group, some new names from the automotive and tech sectors were in attendance – a difference from years past. The institutional investment community was more prevalent this year, but still a minority at the conference. This is likely due to the fact that the conference is less focused on investors.
· My thesis of valuing “execution over exploration” seems to have taken hold as the most advanced development stories including Lithium Americas, Orocobre, Nemaska, and Neometals garnered the most attention at their respective presentations. Everyone is watching to see how the Nemaska and Lithium Americas capital raises unfold as an announcement on each is anticipated shortly. There was much more forward thinking at this year’s conference relative to years past.
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):
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.
