Good morning all,
Here's some reading for you to accompany your morning coffee!
In light of the fairly dramatic SP drop at the end of the day yesterday, I thought it would be useful, and might still some troubled minds,
to recount further important points taken from Simon Moores' Opening Presentation at the BMI conference and to add a few comments from other presenters..
The most salient point and the theme of Simon's presentation was very simple:
There is a COMPLETE MISMATCH between Supply vs Demand for battery metals.All of the presenters showed graphs with forecasts for demand out to 2025, 2030 and in one case to 2040.
In every projection there was a
'hockey stick' growth line showing that the demand for Li and all other metals will increase exponentially....and
soon.Simon stated that by 2028 there would be 37 Million EVs on the roads but there is
NOWHERE near enough Li in production for this forecasted demand to become a reality. More than 2 million tons of Li will be needed to feed the battery plants. The demand is coming from, in order of importance:
1. China
2. Europe
2. North America.
Currently, the lower grade Li Carbonate is attracting prices between $8K - $11K but higher grade (and Li Hyroxide?) will attract higher prices.
The demand for Li is doubling but still the negative sentiment persists. No one seems to be able to understand or account for this.
Simon outlined his thoughts on how the (he believes) the auto manufacturers view the supply chain.
2016 -
Arrogance- the suppliers will provide us with all the materials that we need.
2017 -
Realisation - that supply would take time to develop.
2018 -
Passive Involvement- auto manufacturers entering into JVs with miners and suppliers of materials.
2019 -
Active Involvement - buying their own mines.
2020 -
Capacity and Location, meaning that battery plants will need to be built where the cars are built.
The balance of power favours the auto makers at the moment because they are forced, if not willing, to take the risks.
However, in Simon's view, the auto makers' thought processes are not very strategic, nor advanced.
The questions raised were these:
1.
Will mining and chemical companies merge?2.
Will auto makers take control of the mines and production?Australia can start moving away from its reliance on China due to the ever increasing demand in Europe and North America.
In the short - medium future EVERYTHING will be Li-on based.There was a point raised at the end of the presentation about the aftermath of the production of Evs and the battery supply chain.
Question was: If Australia was not going to produce EVs, could Australia produce/supply replacement batteries? Good question.
As I wrote in my earlier post, Simon is convinced that
"The Battleground will be Chemical Production."Chris Reed, MD of Neometals made the point that:
"It is important to have a partner with an equity stake at the Project level and not just in the Off take." Interesting!!
Chris stressed that we must not lose sight of the long term. Whist there is short term pain with the share prices 
, all battery materials, especially Lithium, will be needed SOON. The mid - late 20s will be the inflection period for Evs with a forecast of more than 20 million EVs being sold annually from 2030.
Reg Spencer, Head of Mining Research Australia at Canaccord Genuity reinforced what Simon had stated:
1. 11 Million EVs will be sold in 2025 compared with just 2.1 million in 2018.
2. 'Bears' project that fewer than 4% of vehicles will be Evs by 2025 compared with a projection of 16% by the 'Bulls'.
3.
By 2030 there will be a whopping 1500% increase in the demand for Lithium, noting that the supply side has huge challenges. 
Finally,
Marco Romero, MD of Euro Manganese stressed that the auto industry knows that
it has to be greener.There is a huge importance attached to having 'green' products' ... so that made me feel all warm and fuzzy.
I hope that some of these points will help still troubled minds. Keep focussed on the medium - long term and I'm sure we will all be winners.
Cheers,
Lynxie
(20min delay)
