How we are positioning for the next lithium boom (site visit insights) Our key insights from a week of visiting companies in Western Australia, with 5 actionable ideas
Earlier this month, my colleague Luke Laretive and I spent the week in Western Australia, meeting companies and contacts as part of our regular “get out to find out” schedule. Seeing things firsthand is crucial—desktop analysis is all well and good, but spending days with management, asking tough questions, getting nuanced answers and gaining direct industry insight in a casual setting significantly enhances your investment process…
As you can probably imagine, a handful of analysts and fund managers sitting on a bus for a few hours results in some entertaining, ‘spirited’ debate about our “top picks”. Luke (as he’s been known to do) dusted off his stockbroking skills and pitched his latest thinking surrounding Vulcan Energy Resources (ASX: VUL), a lithium brine company at the forefront of DLE.
Using the back seat of the bus as our sample set, it was clear to me (at least at the time, prior to the RIO/LTM deal) that very few fund managers or analysts had adequately investigated the potential for direct lithium extraction (DLE) to participate meaningfully in the battery supply chain, much less disrupt higher cost spodumene.
Without naming and shaming our counterparts, the comments about Arcadium were along the lines of "too complex", "too much focus on downstream" and "lacked technical expertise” to appeal to the likes of Rio Tinto. Luke and I, however, have long argued that these assets are underrated, with Rio Tinto the likely acquirer, given their Rincon asset is just 300km south of LTM's Olaroz and RIO management's previous experience working in Argentina. A week later, the deal was announced, and in our view, we think this takeover is the ‘starter gun’ for the next phase of growth in the lithium sector and, specifically, the emergence of DLE as the critical technology to unlock value.
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(20min delay)