Ann: At The Market Raise, page-96

Nice post. To keep things safe at an asset level management need to ensure they don’t take on onerous debt just to get the project complete. On the plus side, worth remembering that commodities always surprise us. Everyone thought thermal coal was dead/un-investable as it steadily trended down from 2018-2020, what happened next – a supply shock from an unforeseen event and it 8-bagged. Even now the new floor price appears to be 2.5x the 2020 lows, when it was completely out of fashion. This year similar fears hit met coal, it was all talk of soft demand out of China etc, and a sudden unforeseen event (fires at two large mines) and sector re-rates inside a week. Same with iron ore; in Q3 of 2022 there were all these China/Evergrande fears – what happened? Sank to US$86/t and then finished 2023 at US$140/t. Because of that strength many fundies thought 2024 would be the crunch year, but we are over halfway through and it’s spent much of the year over US$110/t. I think there’s also a parallel lesson with gold. If you’d been told that interest rates (which GP is very sensitive to given physical gold provides no yield) were going to go from close to 0% to above 5% you would have shorted gold – and yet other macro events and US debt has meant that gold has mooned even at a time when you can earn 5% risk free in a bank account.

Lithium is obviously not without its uncertainties (EV demand softness, DLE technology, China/Africa supply, etc) but there’s always the possibility of something from left field to surprise the consensus view and mix things up again.