Thanks for sharing, I'm still getting through the 6 hour conference and I am very excited for the future ahead of us.
It's good to see financiers, miners, non-profit organisations and governments all on the same page discussing the opportunities, the challenges, the strong need for lithium production, and what we expect to see over the next 15 years to become a more mature market. As we progress along these stages it ought to see exceptional wealth creation for shareholders whom will be the recipients for the trillions of dollars required for future investment across the battery industry (from present to 2040) as we shift towards an electric future.
I'd like so share a few takeaways I've got from the conference - mostly outside of the LTR presentation in the beginning as some slides for that were already shared here earlier.
Alignment across the west is required for lithium to become a mature industry:There is a lot of volatility in the industry, which is what we expect as we are the early stages of transitioning towards a net-zero and electrified future. To reach this future, a lot of coordinated work needs to be done by the governments of many different western nations, miners, banks, and non-profit organisations.
All though we are united on a common goal, our critical minerals sector will need support from the
government in:
- The need for establishing an Australian equivalent of the Inflation Reduction Act (IRA), and the same required of other western governments.
- Fundings and policy assistance as we develop our mid-stream and down-stream capabilities - WA government already has a plan.
- See WA Government's 2024-2030 plan to provide assistance in critical minerals with mid-stream processing in Australia. This aligns with LTR's ambitions of potentially processing our spodumene into lithium carbonate/hydroxide to create additional value for our customers.
By the government providing strong support, it'll help financial institutions to get behind these projects.
A common theme was the importance of
decreasing reliance on China as this creates a single point of failure, and the need to diversification across our supply lines. Noting this wasn't an anti-Chinese sentiment, but an expression towards securing a stronger and resilient market. This brings me to the good work that Benchmark is doing in providing
another source of lithium pricing away from the SMM. I think this is huge for western nations in combatting the SMM pricing which isn't transparent and prone to manipulation. I was pleased to see Benchmark refuting the over-supply narrative during the presentation.
The heavy reliance on China is a big contributor towards the major volatility in the market so these proposed changes will see strong, stable, and sustained growth going forward. But of course, the west has some work to do here and it will take time... we are on the right track though.
Another big increase in demand for EVs in the west will come through as we see lower-cost EV that are manufactured in the west through strategic western supply chains. This will help with mass adoption and increased support and predictability for our critical minerals. By also decreasing reliance on China, it will force them to push prices up as they lose grip on the monopoly over the EV industry - tariffs on Chinese EVs might help here but it's a slippery slope.
Funding:Many different panelists praised LTR for how they were able to accomplish production during this time of the market cycle, and how insanely difficult it is for any mining juniors to get financing as banks are reluctant to lend when the underpinning commodity is prone to radical changes between its peaks and troughs. Notwithstanding this, LTR's previous funding approval by the syndicate of banks was a positive sign and used as example of how the industry is beginning to mature as it showed bank were starting to have more confidence in the commodity. However, LTR made the correct decision to aligns their interests with long term strategic partners and ultimately securing funding from Ford and LG which was clearly the better path.
Loyal Shareholders of LTR were given praise by the LTR Chief Executive Officer for having funded about $1bn of the KV project, which is more than Ford and LG had both contributed combined.
Funding from shareholders is crucial to allowing companies to take risks and generate returns, something banks aren't interested in as they're only concerned with a steady stream of repayments for low-risk ventures, coupled with mandates to prioritise funding for higher ESG rated projects which largely excludes mineral extraction business... it's a difficult cookie to crack, but the more praise for LTR for having been able to crack it!
A panel member from HSBC pointed out why retail investment is needed over institutional investors. He explained this is largely the reason why Saudi Arabia has achieved a lot of their progress is because over 50% of their companies investors are retail investors that allow them to take bigger risks and benefit from these activities. Contrast this to Australia where 85% of invested capital is from institutional investors who are risk-adverse increasing reliance on debt financing and making the cost of capital too expensive to compete on a global front.
Conclusion:It is really very exciting to see where we are headed, and I can't wait to see how LTR evolves over the years as we find new opportunities through the ever-improving critical mineral space. It's very hard to speculate a price of where LTR could be in 2040 because I think the landscape and demand for our resources will be pretty different than analysts are expecting. They probably aren't thinking about how technology will rapidly change overtime beyond the EV space. The first iPhone was only released 14 years ago and technology develops more and more rapidly.
Think:
- Every new house built:
- Every commercial building
- National energy storage solutions.
- Military applications beyond vehicles.
- Personal robots... sounds weird but Tesla / NVIDIA plan on producing billions of these, I'm sure they will require a lot of lithium to move around.
- Drone delivery services and electric-helicopters.
- Shipping vessels.
- Rail networks.
- Agricultural machinery.
- Unforeseen new technology that doesn't exist yet.
I topped up my shares a few times over the last week (personally and in superannuation fund), doing my bit to help us see this future!
Cheers,
CK
(20min delay)