Good News & Bad News, page-12795

My largest lithium exposure is PLS, IGO then AKE.

If I was explaining the difference in valuation between PLS and AKE, here is how I would think about it.

• PLS has the highest exposure to spot pricing and the largest current production capacity.
• Given they are the largest producer today, they are most likely to benefit from continued short term supply deficits
• PLS has its deposit in Australia, which has next to 0 political risk. No tax royalty risk, no organised crime risk and better infrastructure and shipping.
• Short term, highest earnings potential, but requires pricing to stay elevated to compete with an AKE, IGO or LTR in the long run.
• AKE have a lower quality deposit in Australia. Short life, lower recoveries and purities but get reasonable exposure to spot pricing over the next 3 years.
• AKE have the holy grail of deposits in Argentina, however historically getting these deposits developed and producing has been a pretty hard slog. Issues with water, infrastructure and labour.
• AKE need pricing to stay elevated in the medium term to realise the same earnings as PLS give their lower production volumes.
• Argentina has political risk, tax royalty risk and organised crime risk. Canada political risk, tax risk.
• AKE has the largest production growth potential of any of the lithium producers given it's huge deposits. The question is when do they come online? And what will the price of lithium be when they do?
• Growth potential is much larger with AKE, have downstream capabilities and regional diversification.

The highlight for me is that supply increases are further away then what GS or any other "Investment bank experts" have been suggesting. AKE can't ramp up production, RIO had rincon blocked. That leaves MIN, IGO and PLS to supply a market already in deficit. AKE will ramp up, but not by a lot.

This means prices are likely to stay elelvated for much longer.