Ann: BMX pre-auction bid, page-159

I don't disagree that prices are likely to stay higher for longer. My concern is the probability that the stay higher for longer relative to the cost of owning PLS.

When it was trading at a forward PE of 5 around 4 months ago, the risk return made a lot of sense. Now that's trading at 12 - 13 (Based on the same forecast price assumptions) the risks are now too high.

I'm not sure what the catalyst will be for lower prices, I don't subscribe to supply catching up for at least the next 4 years. However, we have seen signs of slowing forward order books for cars, both in EV and Petrol. EV has had a much larger back log, however it's clear we are moving into a environment with lower consumer spending (negative wealth affect from higher rates). This in my view will affect forward order books which in turn will decrease demand for discretionary items (EV's). Understand different governments have different targets for EV auto by 2025, 2030 etc, however given the deteriorating macro environment these targets will likely change. We already see evidence of this with much of Germany returning to coal fired power stations until they can fix their energy issues.

If orders for EV's do weaken in the short term to medium I would expect the lithium price would crash much like we have seen with LNG prices. It will ultimately recover given the structural tailwinds and government mandates, however that doesn't help the potential short term share price pain.

In short, risks are very much to the downside (IMO) for PLS. I still own AKE and MIN, prefer them on valuation grounds. However shorting PLS and holding both AKE and MIN seems like a great way to play lithium right now. Probably a popular institutional trade.

That's my thesis for not owning PLS right now, and I suspect it's why you are seeing a lot of selling pressure and shorting. But who knows, prices may not come down and demand may continue in a straight line for the next 5 years with no supply response. I highly doubt it though, my bet is we see demand destruction very soon.