I've just been reading the argument/discussion going on at the short position thread. The usual concern over there not being enough announcements and other players getting more runs on the board.
This spiel is for people with intention of holding GXY long-term. Also you should be able to zoom in and out on map above which just depicts GXY mines, companies surrounding them and a (by no means exhaustive) list of companies that will need a lot of lithium, especially those who have some kind of link to Panasonic - who seems to be trying to juggle a lot of balls at the moment, and a couple of companies proposed production facilities that just have real potential to encourage uptake of EV. Notably I couldn't find any producing mines in Europe so Canada at this stage seems to be a quick trip across the pond to access lithium needed for European battery production. Rio seems no closer to production in Serbia than GXY in Canada...please correct me if I'm wrong. East Canada also seems to be becoming a bit of a hotspot for proposed mines which is interesting as at the moment I don't think it produces any lithium and is not in the top 10 (again correct me if I'm wrong). I don't know, but Canada seems like a good place because it is probably far cheaper to mine than EU and is close to both the EU and North America where it looks like there is a rush on to get into production of the worlds most sought after car brands.
The building/upgrading of Mercedes, VW and second Tesla giga-factory in the USA are relatively recent announcements but will in future call for far more lithium than is supplied today, IMO - especially when added to the plans of those companies and others in Europe and those that are planed for China and Japan - that are perhaps some of the biggest (though I've not documented most of these on map). No one is on top of this murky situation. It is a puzzle and my take involves secrecy being a major strategic component for those that wish to come out on top, and more importantly for those who are dominant enough to use secrecy. People want announcements, but I'd suggest that the poker face is always the best play if possible and to be suspicious of those that have an announcement every second day...they are probably not in a position to be a major player in the near future. I learned this lesson with LIT and was thankful to get out with tiny losses. My first foray into the sharemarket which taught me A LOT!
Here is my take:
1. It seems a very likely possibility that in the next two years, some massive deals are going to go down amongst miners/processors and companies in the market for lithium. VW, Daimler (Mercedes) and Toyota are really only just getting started on this caper. For them it is a BIG caper. They are going from relatively sure footing to very unsure footing. However, all three have said they will be investing billions.
2. Toyota will be relying more heavily on Panasonic. Tesla is already a Panasonic customer. I think it is fair to say Panasonic will very shortly (if not already) be struggling to find the raw materials to satisfy all these customers and the many I have not mentioned. There was some speculation around batteries being the hold up for Tesla 3. Maybe not, but I don't listen to much these companies say when it comes to accuracy of divulging what the real issues are to the public. Inaccurate or misleading information is another key in the art of war.
3. There were rumours (I think in AFR) a while ago that GXY was in talks with Panasonic. We haven't heard any more but what we do know is that GXY is happy to be quite secretive about the deals it is doing. If I were Panasonic, VW, Toyota, Daimler, Tesla...etc. I would be very keen on letting the market know as little as possible. The mines that are going to supply this demand are not up and running yet so why would you be shouting your intentions or thoughts about off-takes and deals. It doesn't seem wise for GXY or any of its potential customers. I think this is a different story for smaller miners and bigger ones like PLS who really need the market support and the deals to get the funding and borrow the money. They have debts and deadlines given to them by others. GXY is relatively free of this pressure and knows that the enemy troops (market) have not advanced far enough for the muskets to be accurate enough. Why blab when you know it is not what your potential customers want and you don't currently have production to supply them anyway. One thing all parties could agree on would be to keep their mouths shut for the moment.
4. This leads me to believe that secrecy is a crucial tool at the moment. Hold your cards close to your chest. Neither GXY, Panasonic or others has a great need at the moment to trumpet what they are doing. I think it is also quite telling that these big car companies are able to so quickly upgrade their projections and commitments to building EVs. Basically it seems to me that they are trying to stay as open as possible to rapid uptake of EVs (faster than any market analysts predict) or something quite a lot slower....they would prefer the slower. So, that is what you tell the market until another car company one-ups you (or you agree in private to have relatively simultaneous announcements - I don't underestimate levels of collusion). This has been happening a lot in recent times with Daimler, Toyota and VW all saying recently of the massive investments they will make in setting up EV manufacture in the states and Europe.
5. Panasonic, in talks with GXY might have said: Look we are interested if...and GXY has said no we cannot
commit to that...Both agree to keep the channels open until the future of EVs and lithium supply is less murky. For Panasonic (and others), the manufacturing facilities are not ready. For GXY the mines are not ready. They also don't want to be sold short or give away any control that might be regretted in future. When the enemy is rushing towards you and you are lying in wait, patience is key.
6. Secrecy and patience are key when you feel like your position is strong...and when the market is not even close to being realised in the way that would need all the juniors that are starting out. Panasonic is (as far as I can tell) the leader in EV battery production by far. The last thing you would want from a potential supplier is for them to be showing their hand. And the last thing GXY wants is to lose its position of strength by divulging its strategy - which definitely includes pricing.
7. So, my thoughts are that a meeting between GXY, Panasonic and others could largely just be about keeping channels of communication open while agreeing that it is best for all involved to not divulge progress of talks or anything other than vague statements to the public...which unfortunately is us as an announcement on the ASX is public. We like to think of ourselves as the in-crowd when we press 'buy' but really this involves a lot of wishful thinking.
Sun Tzu: "O divine art of subtlety and secrecy! Through you we learn to be invisible, through you inaudible, and hence we can hold the enemy's fate in our hands."
Or...don't look at the finger! ; )
I would not underestimate how many business leaders and politicians read Sun Tzu and take his words to heart. So, I know it seems counterintuitive but the best possible announcement for us right now (especially after the stellar JB announcement and hint at extreme secrecy involved in deals) might be the deal/announcement that waits for the right time, rather than made and trumpeted out of a feeling of necessity. After all you don't use an ASX announcement to announce that silence and secrecy is your strategy ; )
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