Over the past seven years, I have dedicated a significant...

Over the past seven years, I have dedicated a significant portion of my investment portfolio towards the lithium mining sector. This strategic choice reflects my belief in the sector's substantial growth potential and the broader transformation of the energy market. Here's why I have made this decision:

Tony Seba, a renowned thought leader and forecaster in the field of clean energy and transportation, has long posited that advancements in technology and declining costs of electric vehicles (EVs) and renewable energy would significantly disrupt the global energy and transportation sectors. Following this line of thought, we can create a scenario for lithium demand in a recessionary market that's driven by technological deflation and rapid growth in EV sales. Despite a recessionary market typically implying reduced consumer spending and slowed economic growth, Seba's model implies that certain sectors may still experience rapid growth due to significant changes in the technological landscape.

In a recession, lithium investments may offer a strong hedge for several reasons, comparable to how oil did in the early 1900s, during times of volatile deflationary recession. Here's why:

• 1 - Technological Shift: Just as the 1900s saw a rapid transition from coal to oil due to the latter's greater efficiency and versatility, we are now witnessing a similar shift from fossil fuels to electric energy, primarily stored in lithium-based batteries. This change is driven by environmental concerns, technological advancements, and economic feasibility. Even during a recession, this trend is likely to persist because of the long-term benefits and existing momentum in policy and infrastructure.

• 2 - Growing Demand for EVs and Renewable Energy: The demand for electric vehicles (EVs) and renewable energy is rising, driving the need for efficient energy storage solutions. This increases the demand for lithium, a key component of these energy storage systems, making it a potentially resilient investment during economic downturns.

• 3 - Policy Support: Governments worldwide are implementing policies that favor the transition to cleaner, renewable energy sources and electric transportation. These policy incentives can help shield lithium investments from some of the worst impacts of a recession.

• 4 - Supply Constraints: Lithium supply is constrained by a limited number of producers and geographical distribution. Any disruption in these areas could potentially increase lithium prices, thereby potentially providing a hedge against economic downturns.

• 5 - Essential Component: Much like oil, lithium is an essential component of a growing industry. In a recession, necessary goods and services typically fare better than luxury or non-essential ones.

• 6 - Inflation Hedge: Commodities such as lithium often serve as a hedge against inflation. While deflation is often the immediate response to a recession, governments' response to stimulate the economy often leads to inflation in the medium to long term.These factors could make lithium a strong investment during a recession.

Lithium presents a unique growth opportunity among the metals market, primarily due to its critical role in the energy transition. Here's why it has the most catching up to do infrastructure-wise, hence indicating the highest growth potential:

• Infrastructure Gap: Unlike metals such as copper, zinc, tin, or nickel, which have been extensively mined and used in various industries for centuries, commercial lithium extraction and usage is relatively new. There is still significant room to expand lithium production and refine extraction techniques to meet the expected surge in demand. This infrastructure gap represents a vast potential for growth that is arguably more significant than more established metals.

• Battery Technology Dependence: Lithium is the key ingredient in most high-density, rechargeable batteries currently in use or development for EVs and energy storage systems. As the world moves towards electric mobility and renewable energy sources, the demand for these batteries, and thus lithium, will skyrocket.

• Low Substitution Potential: While some other metals can be substituted with alternatives depending on price shifts, lithium's unique chemical properties that make it ideal for battery technology are hard to replace. Although research is ongoing for alternative battery technologies, lithium-ion batteries are likely to dominate for at least the near to medium term.

• Policy Push: The worldwide policy push towards cleaner energy solutions and the phase-out of ICE vehicles provide a supportive backdrop for lithium demand, unlike other metals that don't benefit from this focused policy attention.

However, while lithium has immense growth potential, investing in the lithium market is not without risks. These include potential technology shifts, policy changes, environmental concerns related to lithium mining, and volatility in lithium prices. Thus, careful research and risk management strategies should be considered when investing.