In part one we discussed how the various groups will re-position in the supply chain. As China is such an integral part of hard rock lithium mining it's crucial to understand how the supply chain will play out.
We have met with most groups in China from wealth funds, state owned funds, battery manufacturers, processors, researchers and of course EV manufacturers. In doing so we know first hand most of the deals and how they are likely to play out.
I first visited China in the early eighties and have passports filled with visa's. In addition I have lived there for many years and ended up married to who is undoubtedly the pick of some three billion Chinese women. Lucky me. My daughter is half Chinese and we embrace both cultures for their positives and leave the negatives alone.
I got to thinking just how relevant that is in dealing with the Chinese.
It's not just a matter of who the players are and how they fit together but also the personalities are you're dealing with.
I have to be honest here. It absolutely astounds me how I see Australian miners worth many millions try to find their way in the Chinese market. They spend tens of millions on infrastructure, reporting, drilling and mine development. In the case of lithium and most new energy metals they usually find to their disdain that China is the only real market. Suddenly everything gets very complicated. Where to start and how to go about it.
The usual course of action is to find a representative and that representative us usually Chinese and acts as interpreter, guide and babysitter. They cannot travel alone, cannot make appointments, in fact they would be lucky to be able to catch a cab unless the address is written in Chinese.
I was recently stuck at Changsha Train Station after a 90 minute taxi ride. The fast train leaving in a hour was suddenly delayed for another two hours. I was the only laowai (foreigner) in the sea of humanity and no-one spoke English. Changsha was around zero degrees and as cold outside as in. I had to walk just to stop from freezing to a slow death.
The train arrived finally and another 3 hours later I arrived to a deserted station in Shenzhen. A few taxi touts and the usual convincing them that I was not some stranded tourist they could take for a ride.
Arrived at the hotel around 1am. Sorry we only have one room, a suite. But we can fit you in for USD 650. Of course it was not true, so off I go walking with my case past the usual early morning touts until I reach a hotel that's more reasonable. By the time all was done and dusted it was 3am.
The upshot is that Australian miners that cannot speak some basic Chinese have no way to go it alone. They have to trust someone. When I'm not on assignment for an Australian miner I look after my own private company so I've had three decades of dealing with the various levels of business. In a flash I can put a personality profile on a Chinese business man and I like to think I'm right almost every time. What chance of an Australian miner summing up those management personalities? Probably zero. In addition we have others in our group with great Chinese skills and a Chinese Director always on the ground, pushing, prodding and keeping things moving.
The point is that it;s not just about the company. not just what's in the announcement, or who's the biggest, It's very much about deciding who can be trusted and who cannot. For the uninitiated the general rule is that the more technology involved, the better the partner but there are also many exceptions. This is why in my previous post I alluded to the fact the processors are on a different level to battery manufacturers.
My advice to Australian miners. Do not expect you can run along to China and get a good deal. It rarely happens. If it does it's usually very rare and mostly luck. Do not expect you can trust that Chinese consultant you found because someone else got a deal which was actually a bad deal. It was still a deal. Right?
China rarely involves doing a deal with one party. You have to bring trust into the relationship by the partners you chose. You have to look long term and you have to make sure you know the wealth fund that backs them or disaster and broken promises can follow.
At the end of the day we sell a story and bring them in as one of the lead roles, We find associates for them and we can generally do that better the the Chinese themselves in new energy.
When all is said and done there are some exceptional Chinese entities and exceptional management behind them, It's a very specialized business and there is nothing more rewarding than putting it all together. Find the technical expertise, find the wealth fund, find the producer and fine the customer.
As shareholders, it;s even tougher to understand. You face the same problems as management but actually know less about the final deal. Don;t blame China for bad deals. Blame a lack of homework, a lack of understanding and a lack of experience. When those elements are present deals in Australia, Europe or America can go just as wrong.
PLS Price at posting:
53.0¢ Sentiment: Buy Disclosure: Held
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