Hello beautiful people,
Occasionally I get a bit of time off from spending all day watching stock and resource charts in my daily grind.
Today I spent 'Market Research Mondays' (as the boss calls it) playing with CXO and TSLA in TradingView. I use TV too much.
However I find these two symbols interesting because they each represent the opposite extremes of the global lithium supply chain, and I will be buying the latter's product, but not the former's stock.
The two charts I hope will make that statement clearer to those 2 or 3 of you that take an interest in my prolific, unrequested, non investment advice.
They show the SP performance for both symbols over the last six months, and the difference speaks volumes (to me) about the spectrum of opportunity within the global lithium supply chain.
This is CXO for the previous six months.
This is TSLA for the previous six months.
I guess it depends at which end of the lithium spectrum of you see yourself and your investments.
At one end we have the wannabe 'green' quarrymen, and at the other we have forward seeing industrialists with a clear, vertically integrated, view of how to make money out of lithium (and whatever chemistry is coming after).
I know you are all so excited about announcements, so here are a few announcements TSLA and friends
will make before Christmas:
• Launch of the 'CyberTruck' aka Tesla 'Ute'
• Announcement of Model Y in China
• Announcement of Tesla Semi production
• Launch of StarLink 1.0 constellation (60 satellites) again using reused rockets and fairings
• Start of production (geddit?) of Gigafactory 3, the most state of the art factory ever built
• Test abort flight of Crew Dragon
• 20KM flight test of Starship Mk1
• Completion of, and test firings at the
Then you really need to look at such Tesla Energy developments as
• The Megapack. Grid scale battery packs
• The ongoing rise of PowerPack for commercial battery packs
• The PowerWall for residential use.
And that's just to name a few. For those that get off on announcements and SP, then TSLA is way more fun that CXO.
The only change I can see for making a CXO buck from TSLA, is a supply contract from some shitty Chinese industrial metal producer selling 99.9% product to the likes of CATL for $15K a tonne. Expect that price to drop. You can do the backward math from there to 5% spodumene concentrate prices.
I have pointed this out previously here. When you are at the very arse end of the global supply chain, with Australian competitors producing hydroxide/carbonate for ever decreasing prices and margins, its a steep road to climb.
When you look at all the industrial inputs for the global battery industry, lithium will be the material that suffers the highest downside.
After all lithium is only 1-2% of the mass of a single lithium cell, and much less than that of an average EV battery pack.
Nickel, Graphite, Cobalt, Manganese, Copper, even Aluminium all will do well from the battery industry.
Lithium will end up like silicon.
Do you ever hear about people getting rich from Silicon, aka PV Panels? No you don't. Silicon is everywhere, it's fairly easy to produce, and its hardly a cause for PV to rise in price. Where the money gets made in silicon, is at the technological end, the chips, the wafers, semiconductors, PV cell manufacturing, etc.
And the same is true for lithium. It is an abundant mineral, and the global market for the technological end of the product cycle (eg EV battery packs) will drive down the value of the raw product to about the ~ cost of production.
The other thing that will continue to drive the price of lithium down, will be further technological development in battery chemistry.
In the case of TSLA, they have already made some announcements that are relevant:
• Maxwell acquisition for Anode/Cathode electrolyte technology
• Canadian battery automation company Hibar acquisition
• The million mile battery packs
Its a fact, that TSLA aside, every battery manufacturer is making Li-Ion batteries that last more cycles, charge quicker etc.
Guess what? TSLA will be using far less lithium per vehicle in the future. Those million mile battery packs will decimate the demand for lithium (and all other inputs too) for TSLA alone. Expect this battery technology to be licensed to others as has been announced (rumoured) with Fiat Chrysler and others.
So... anyhow... looking at both ends of the global supply chain for lithium and where true value is to be gained, my money is on the pointy end of the market, where technology and innovation make the real brownie points.
The less pointy end of the global supply chain for lithium, where quarrymen, lawyers, accountants and geologists play mercilessly with the live savings of humble retail investors on the local bourse in shitty, unregulated third world countries like Australia is probably not such a great place to be.
You know what? CXO (IMHO) is just another diesel powered quarrying operation that are selling the family silver to pay the rent. Thats why people call them "rent seekers".
But if the directors and board had some vision, they would reinvent themselves as a tech energy company, that just happens to be sitting on reasonable amount of lithium.
If they had some vision for their "green" lithium dreams, they would be installing MW of solar, and many MWh of battery storage on the Bynoe grid.
They would be running their proposed plant on gas powered grid energy.
They would be planning to use state of the art EV mining kit from the likes and CAT, Volvo, Hitachi etc.
But the sad fact of the matter is CXO will do no such things and the directors have made that blatantly clear>
And that my good HC friends are just a few reasons why the value proposition with investing in lithium lies at the upwards pointy bit of the lithium spectrum.
* Not investment advice, just observations. Good luck to all. The picture is way bigger than we can see. I have a magnifying glass.
(20min delay)