NPV vs Increasing Market Cap, page-52

I see your point about bubbles, but what makes you believe that lithium is nearing the end stages of a bubble?


According to Bloomberg, the point of lift off sales for EVs won't even begin until 2022. Personally, I think they're being far too conservative with forecasts of only 35% of new vehicle sales coming from EVs by 2040, but that is beside the point. It should be clear as day that this lithium "bubble" still has legs to run from here. That is unless you believe that another viable battery technology will soon emerge rendering the world's Megafactories obsolete before they ever even get off the ground running...

Further, if the demand is indeed real and increasing steadily , wouldn't you need a catalyst, like an overwhelming supply of new lithium flooding the markets to cause prices to come crashing back down?

The global lithium market was operating in a supply deficit in 2015 and remains so in 2016. New brine projects aren't expected to respond until 2021 or so...

So, over the next few years, an increase in LCE production is limited to the following sources.

Will that be sufficient to meet the world's growing appetite? Tesla alone is aiming for 500k/year EV production in 2018, and full-capacity by 2020...

As for lithium prices dropping? The cash costs of spodumene concentrate for PLS are $205/t (including credits for tantalum). Right now, offtake agreements are settling at $600/t... Even if prices were to drop by 1/2, PLS would still be profitable... It's not like they don't have any kind of margin in place to merely "survive", should prices plummet...

Here's an outlook for lithium prices, showing LCE above $10,000/t and spodumene above $500/t.



Over time, eventually, yes, lithium will be in a bubble and there will be a blow off top, like there always is for disruptive technology... But to compare where we are today with lithium to the dot-com boom in the 1990s where you had start-ups with no real products/assets trading at P/E over 1,000... that comparison seems kind of extreme.