Lithium stocks are down because demand growth is nowhere near projections. If one were to look at my charts on the EV thread, it would be easy to see that the story is not rosy. Every year more supply comes online, so demand needs to rise with it. Without it, when in surplus, the price comes down.
The advantage for stocks like LTM and PLS is that they are low cost suppliers. What has happened is that high cost supply has come off the table, and the price has stablised because the affordable supply is now in a steady state with demand. So LTM and PLS will continue to make money.
Until the demand situation turns around, we will do okay and continue to make profits, not super profits but great profits compared to other industries. The delays and shutdowns will only make us stronger and more profitable if and when demand improves due to the closure and delay in other projects.
The biggest impact is with the smaller companies. They will be screwed for about a year. CXO is one of them. They are in a similar situation as GXY faced in 2019/20 when Mt C, our only producing asset, was no longer profitable. But eventually, a turnaround is possible because at least they still have some cash, but the risk for them and others is high.
My position in LTM and PLS has always been stated to be high, that is my savings grace. I know the turn around is just a waiting game. I had some small positions in smaller companies like CXO that have impacted my portfolio. I have self-reflected and seen how my laziness and growing trust in a few analysts, which resulted in me doing less research, has cost me money. I think that is the first sign that trouble is ahead when you get too comfortable and take your eye off the ball, which I did. I thanks PLS and its showering of dividends that I spent travelling on that :>
In terms of the discussions on LTM vs PLS price differences, the key difference is 'Argentina'. Argentina is our savings grace in profit margins, but it is a high risk country, and that risk has become more questionable due to the new president (who appears to be a capitalist and okay), but more importantly, the recent court ruling on exploration, which appears will not impact our existing operations. The recent notice from Galan, has raised eyebrows as well. We need to understand that Argentina is a huge proportion of our profits, and while it can give us great rewards, it is not risk-free.
In terms of recent discussions about management, I have a few opinions, some that have changed over time. But this is what they are:
GXY merged with ORE because it saw Mt C had limited life and did not foresee the huge spot price surge coming (no one had forecasted that apart from us HC fans). They released they could not build SDV. We need to remember that they sold the north to Posco and SDV was almost sold to Gangfeng, but they were not willing to pay a high enough price. This led them to take the play into their own hands and they did not have the expertise for that, so had no choice but to go to ORE and say please take all our great assets with no premium.
Only problem was that ORE management, while being in Argentina for so long still was not a master of brine. Battery grade was always a problem. Still had to give them credit for trying. Mt C cash flow was used to help build stage 2, but stage 2 is all technical grade, being upgraded to battery at Naraha. Well, we have learned that the Japanese struggled to get to battery grade. We had delay after delay. So we ended up with this massive Stage 2 with crap grade and limited pathway to battery. What is worse is that SDV was being built, and they probably were not sure if they could reliably produce battery grade their either (even though on paper it was a 100%, in reality who knows).
I think they worked out that they had the resources, but not the expertise to get things done. We were not gaining better talented workers, our best talents were actually being poached by other startups. We can talk all we want about Livent management, but we have to admit that they can produce battery grade, they have built multiple conversion plants and more in the pipeline. Like it or not, we need their expertise. Now, with hindsight, it is clear why the merger was initiated. We needed a get-out-of-jail card. Now we just need to wait and see if we can deliver. LTM now has the expertise and a portfolio of growth projects that it can deliver when the market is ready for it. Let's just hope they can deliver. For now, we just need them to cut costs so that even with these prices, we can make as much as we can. Not fighting between ourselves for resources in Argentina is a great starting point.
Now it is all just about demand. Battery storage is the current only saving grace, together with china ev sales. The rest of the world is problematic, Tesla has become problematic with their strategy, the world has become fearful of their lack of competitiveness with Chinese EVs (holding back policy as a result) and interest rates are too high. These problems need to be solved, and EV sales need to pick up. It does not matter how many new models are in the market, what is important is that people are buying the models available. These new 1000km (realistically 750km) batteries will probably change the narrative. Mainstream in about 12months?? Therefore, we have maybe 12 months of turbulence to work through. Just remember what happened the last time when the 19/20 turbulence ended.
Sorry if you disagree with my thoughts, but I thought it was about time to share them. My thoughts are my thoughts.
My main case is, that if you are prepared to wait, and Argentina politics don't do something stupid, history may repeat itself. We are currently undervalued. Undervalued for a risk reason, but still undervalued. DYOR.
(20min delay)
