The market is scouring for the next PMT style winner - guess WR1 is perfectly suited for these investors imo. 
Not advice
One ASX winner from lithium’s ascent is Mineral Resources. Its shares are up nearly six-fold since 2020 to $94.20 on a $17.9 billion market cap.
But those returns look paltry compared to Pilbara Minerals. The West Australian producer’s shares are up from 29¢ at the start of 2020 to $5.11 today on a $15.4 billion market cap.
The sensational 17-bagger return is largely credited to “lithium legend” Ken Brinsden.The 51-year-old mining engineer joined Pilbara as chief executive in 2016and took it from a penny stock explorer to major supplier of spodumene concentrate to Chinese buyers that convert it into battery-grade material to energise Tesla batteries.
Brinsden retired as Pilbara chief executive in July 2022, but has re-emerged as non-executive chairman of Canadian lithium explorer Patriot Battery Metals.
Patriot’s primary listing is on the Toronto Stock Exchange, but it listed CDIs on the ASX on December 7 at 60¢ each. They’ve already more than doubled to $1.42, and not for nothing either.
Last week Patriot announced blockbuster drilling results at its Corvette tenement in Canada.
Macquarie analysts called one drilling hit an “extraordinary ultra-high-grade zone” of 25 million tonnes at 5.04 per cent lithium oxide grade. This hit is in addition to a 156.9 million tonne intersection at a more modest, but still strong, 2.12 per cent lithium oxide grade.
This week Macquarie told investors: “These intersections underpin our view that Corvette is likely to become one of the largest spodumene projects globally, with grades of this nature only in evidence at the world-class Greenbushes mine in Western Australia.”
The Greenbushes Mine is widely regarded as the world’s best lithium resource and is jointly owned by Albemarle, Chinese investors and ASX-listed IGO Ltd.
Patriot’s results suggest Brinsden’s new lithium play could compete, but the explorer isn’t expected to sell lithium until after FY2028 and must raise hundreds of millions of dollars to reach production. In other words, the stock is what your parents might call a bit of a punt.
Unknown future prices
For sharemarket enthusiasts the big unknown is whether today’s sky-high lithium spodumene and hydroxide prices are sustainable over the long term.
Brinsden is on the record criticising professional analysts for misreading lithium markets and not acknowledging the cost curve’s shift to the right on soaring demand.
More broadly, this means tying lithium price forecasts back to cost curves and marginal costs of production is difficult and doesn’t make much sense for professional analysts in an environment where explosive demand for electric vehicles is impossible to forecast.
This weekUBS upgraded its lithium price forecastsby up to 50 per cent in a mea culpa that acknowledged it previously underestimated the level at which high prices would ration demand from North Asian battery makers and electric vehicle buyers.
Meanwhile, Musk again used Tesla’s earnings call to claim it would be the most valuable company in the world one day and emphasise that the only limit he sees on demand is affordability, as Tesla cut prices over the previous quarter.
In a bull case scenario electric vehicle and lithium demand could reach a television-style tipping point.
In America immediately after World War II, televisions weren’t affordable. In a survey most households responded they didn’t want a television because they had radios and drive-through movie theatres. However, once new technology made televisions affordable the tipping point into their mass adoption was quicker than expected. Numbers went from 6000 in 1946 to 12 million in 1951, on one estimate.
Despite the excitement around UBS’s pivot, the broker still expects lithium prices to fall, and it’s probably fair to say it doesn’t expect a television-style tipping point. This is a call in line with the consensus of every major investment bank.
Generally, it’s a dumb idea to bet against the investment banks, but retail punters who’ve taken the contrarian view on the likes of Pilbara have made a motza, so far.
Disclosure: The author Tom Richardson owns shares in Tesla.
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