The Conversation (2)
At the recent Vancouver Commodities Forum, Chris Berry of House Mountain Partners and the Disruptive Discoveries Journal took some time to speak with the Investing News Network about the lithium market.
At the recent Vancouver Commodities Forum, Chris Berry of House Mountain Partners and the Disruptive Discoveries Journal took some time to speak with the Investing News Network about the lithium market.
Berry spoke a number of topics, including:
- His experience at the recent Lithium Supply and Markets conference in Las Vegas
- Where he thinks lithium prices could be headed in the next twelve months
- Which junior lithium company he believes separates itself from the pack
Watch the video below for what he had to say:
Interview Transcript
INN: So you’ve recently moderated a panel discussion at the Las Vegas lithium conference. What were your takeaways from the panel?
CB: Well, I thought it was interesting because, you know, it was an interesting panel. So you had industry pundits and you had several CEOs of lithium players that were at different points of the development curve, or the development stage. And so, the takeaways are, I think, number one; that everyone is sort of universally bullish, which could be a contrarian or dangerous sign. But I think from talking to these gentlemen and also the general consensus of the conference is that the demand story is real. Whether or not we just focus on electric vehicles or energy storage, those are the real drivers of demand going forward. But I think it’s an interesting case of whether or not supply will be able to keep pace with demand. It’s a very tight market right now and I think it will probably stay tight to 2020. That’s what I was thinking going into the conference and my thinking along that line was confirmed at the conference.
INN: Yes, a lot of people are bullish, but you also mentioned in your most recent note that there’s a lack of consensus on the price. What are your thoughts on where the price is headed for carbonate and hydroxide over the next 12 months?
CB: I think that one of the challenges with lithium, obviously, is that there’s no futures market, and so a lot of the price, whether we’re talking about carbonate or hydroxide, is really done on a handshake basis. There is spot activity in countries like China and that’s what has everybody excited right now. You’ve got carbonate prices that are twenty to twenty-five thousand dollars a ton, hydroxide prices that are reportedly higher than that. I don’t think that’s sustainable. I think that’s a speculation in the market to certain degree. How much of that? I’m not exactly sure, and to be honest with you, I don’t think anybody is. To answer your question specifically, I think you’ll probably see longer term carbonate prices around the $10,000 a ton mark and hydroxide prices perhaps slightly higher than that as well.
INN: Ok. And of course you’ve spoken a lot about how cost of production is more important than price, so how does that play into investors looking at earlier stage plays?
CB: Well, it makes it difficult because one of the things that I’ve said for a long time about lithium and you could say the same thing about graphite or some of these other niche metals, is that price is not the most important factor. And so when you’re trying to gauge the value of a company or the value of a deposit, looking at a carbonate price of six thousand or ten thousand or twenty thousand dollars a ton really isn’t what you should be focusing on. What you focus on is the potential cost of production. I know I sound like a broken record but lithium is an oligopoly so you have a few number of players or producers at the top and so you look at what their cost of production is, for example; SQM (NYSE:SQM) down in Chile or FMC (NYSE:FMC) in Argentina and then you go from there. And so any of these incumbent producers, despite the fact that the demand, I think, is very healthy going forward, any of the incumbent producers will need to meet or beat the existing producers, and that comes down to cost.
INN: Right, and you might not sound like a broken record because there is so much new interest and investment and money coming into the lithium sector right now. So what can investors look for to look for really long-term plays?
CB: Well, I think what you’re asking, Teresa, is really the difference between an investment and a trade, and to be honest with you, a lot of the money, a lot of the companies that have come into the space in the last two or three months are probably trades in the sense that we don’t know a lot about the deposit. Again, price is sort of a wild card, and we know nothing about the cost. So it’s kind of a ‘buyer beware’ thing. I personally think that there are a number of well run, legitimate companies in the space with market caps of say, at least a hundred million US, that are investments and are poised to add supply in the next five years. So those are particularly interesting to me.
INN: Ok, and what are the names of some of those companies?
CB: Well, one is obviously Lithium Americas (TSX:LAC), I’ve been focused on them for a long time. They’ve been able to really, I think, separate themselves from the pack with the joint venture with SQM they’ve just negotiated. So now they’ve got a great deposit. Again, it’s a well-run company, and not only that, they have the technical expertise from SQM as well. So that’s one that I think will perform very well over the next couple of years.
INN: Ok, thank you for joining me, Chris.
CB: Thank you.
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Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network.
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