In the current global landscape, the management and control of critical minerals such as nickel, lithium, and rare earths are undergoing significant transformation. This transformation is driven not only by market forces but also by strategic national policies. Recent developments in the industry reflect a marked shift from traditional Western dominance towards a model where resource-rich countries are asserting greater control over their natural assets.

The Monopoly of Rare Earths and the Rise of Resource Nationalism

For years, we’ve observed China’s strategic maneuvering to solidify its dominance over the rare earth market. The nation holds the largest operational rare earth mines and processing systems globally. This monopoly has often been criticized as resource nationalism, but it reflects a broader strategy where nations leverage their natural resources for greater economic and strategic autonomy. This approach is evident not only in China but also in countries like Chile and Indonesia, which are now following suit in the lithium and nickel sectors, respectively.

The Case of Chile and SQM

Chile’s recent decision to deny a Chinese company’s participation in the restructuring of SQM—a major lithium producer—underscores a significant shift towards nationalizing resource extraction. The government’s move to partner SQM with Codelco, traditionally a copper giant, to form a national critical minerals company, is a bold step towards retaining more value within the country. This development is particularly crucial as Chile is the world’s second-largest lithium producer after Australia and accounts for 24% of the global lithium production as of 2023.

Indonesia and Nickel: A Strategic Pivot

Similarly, Indonesia, the world’s largest nickel producer, has introduced policies that require miners to add downstream value to their operations within the country. This strategy not only enhances the value retained by the local economy but also helps in building a more sustainable and self-sufficient industrial base. Recent production cuts and market dynamics have influenced major players like Glencore PLC (LSE: GLEN) to reconsider their investments. For instance, Glencore’s exit from the Koniambo nickel operation in New Caledonia after a substantial investment highlights the challenges companies face due to high operating costs and fluctuating market prices.

Global Implications and the Future Outlook

These national strategies are reshaping global supply chains and the distribution of economic benefits derived from natural resources. The traditional model where Western countries control resource extraction and processing is being challenged, leading to a more multipolar resource governance landscape.

Looking forward, the demand for these critical minerals is set to soar, driven by the growth in technologies such as electric vehicles and renewable energy systems. For example, Moody’s forecasts a significant jump in lithium demand, potentially increasing by 150% by the end of this decade and nearly quadrupling by 2050. However, the entry into new markets such as lithium by companies like Codelco will require substantial capital investment, which could affect their financial stability.

Concluding Thoughts

The evolution of resource nationalism and the strategic repositioning by resource-rich nations are not merely economic decisions but are pivotal to the geopolitical dynamics of the 21st century. As nations like Chile and Indonesia assert greater control over their resources, the global community must navigate this new reality where resource sovereignty becomes a cornerstone of national policy. This shift represents not just an economic transformation but a fundamental realignment of global power structures in the mineral resource sector.

Welcome to the latest Technology Metals Report (TMR) where we highlight the Top 10 news stories that members of the Critical Minerals Institute (CMI) have forwarded to us over the last 2-weeks.

Key highlights in this Technology Metals Report includes Tesla’s impressive Q4 delivery record, overshadowed by BYD’s surge as the top EV maker, underscoring the intensifying competition in the electric vehicle market. Energy Fuels Inc. has made significant strides, first by entering into an MOU with Astron Corporation to bolster the U.S. rare earths supply, and then by expanding its uranium production in response to favorable market conditions. Nio Inc. has made a technological leap with its innovative EV battery, boasting a 1,000km range, while global trends in the critical minerals and EV market show shifts influenced by economic and political developments. Notably, Codelco and SQM’s new lithium venture in Chile represents a strategic move in the lithium market. The impact of China’s rare earths export ban stands as a significant moment, compelling the U.S. to foster technological self-reliance. The landmark merger between Allkem and Livent to form Arcadium Lithium marks a major consolidation in the lithium industry. Atomionics’ innovative use of AI and gravity in mining exploration showcases a technological breakthrough. The EU’s ambitious goals for critical minerals, despite challenges, indicate a strong commitment to securing essential resources for its green transition. Lastly, KoBold Metals’ ambitious global lithium exploration, backed by industry giants, highlights the growing importance of lithium in the clean energy sector.

The 10-stories selected for this edition of the TMR with source links to source stories for this fast-paced sector are listed chronologically for your ease and review.

Tesla delivers record Q4 cars, but China’s BYD steals top EV spot (January 3, 2024, Source) — In the fiercely competitive electric vehicle (EV) market, Tesla Inc. (NASDAQ: TSLA) achieved a significant milestone by delivering a record 484,507 vehicles in the fourth quarter of 2023, surpassing market expectations and fulfilling its annual target. Despite this success, Tesla was eclipsed by China’s BYD in terms of sales volume, losing its position as the leading EV manufacturer. BYD, backed by Warren Buffett, delivered 526,409 vehicles, primarily in China, indicating a consumer preference for more affordable models in an economy burdened by high interest rates. Although Tesla’s aggressive sales strategies led to a notable 11% growth over the previous quarter and a total production of 1.85 million units in 2023, it fell short of CEO Elon Musk’s ambitious target of 2 million. The company’s stock remained stable amidst a generally declining market. Meanwhile, BYD’s strategy of price cuts appears to be paying off, gaining market share despite potential impacts on profit margins. Tesla, in a bid to boost sales, offered discounts and incentives, such as six months of free fast charging for deliveries made by the end of December. This strategy was partly in response to some models of its Model 3 sedan losing U.S. federal tax credits in 2024. Tesla’s delivery performance stands out in comparison to domestic U.S. car companies, but it is also facing challenges like regulatory scrutiny over its self-driving technology and the need to adapt to changing tax credit policies.

Energy Fuels’ Strategic MOU with Astron: Shaping the Future of the U.S. Rare Earths Supply Chain (December 30, 2023, Source) — Energy Fuels Inc. (NYSE American: UUUU | TSX: EFR) has recently entered into a significant Memorandum of Understanding (MOU) with Astron Corporation Ltd. to jointly develop the Donald Rare Earth and Mineral Sands Project in Victoria, Australia. This collaboration, announced on December 27, 2023, marks a crucial step in establishing a U.S.-focused rare earths supply chain, vital for meeting future national needs. The project will provide Energy Fuels with 7,000 to 14,000 metric tons of rare earth concentrate annually from the Donald deposit, processed at their White Mesa Mill in Utah. This arrangement not only utilizes the mill’s capacity to manage radioactive elements but also supports the production of critical minerals like uranium. The project is set to initially produce 800 – 1,000 metric tons of Neodymium-Praseodymium (NdPr) oxide by Q1 2024, with prospects for expansion. This development is strategically important in light of the U.S. government’s impending policy to restrict critical minerals sourced from Foreign Entities of Concern, effective from 2025. By fostering a sustainable, competitive, and independent supply chain, Energy Fuels’ initiative is poised to significantly impact the electric vehicle and clean energy sectors in the U.S., reducing dependency on foreign sources, especially China, and bolstering national security and technological advancement.

A Chinese EV company developed a battery with a 1,000km range — and its CEO tested it out on a 14-hour livestream (December 29, 2023, Source) — Chinese electric vehicle (EV) company Nio Inc., often compared to Tesla, recently showcased a groundbreaking development in EV technology by introducing a battery with an impressive 1,000km range. The company’s CEO, William Li, widely regarded as China’s answer to Elon Musk, embarked on a 14-hour live-streamed journey covering 1,044km from Shanghai to Xiamen to demonstrate the battery’s capabilities. Despite challenging weather conditions, Li’s Nio ET7, powered by the company’s new 150 kWh battery with the highest energy density for a mass-produced EV battery, completed the trip with 3% charge remaining. Scheduled for mass production in April 2024, these batteries, though costly at around $42,100, represent a significant advancement in EV technology. Nio’s unique business model allows customers to buy cars without a battery, offering a subscription for battery swaps at over 2,000 stations across China. Despite financial challenges and each car resulting in a $12,000 loss for Nio, this strategy has elevated Li’s stature, drawing parallels with Tesla’s Elon Musk. Li further showcased Nio’s technological prowess at the annual “Nio Day,” revealing the new ET9 flagship to thousands of Nio enthusiasts.

The Critical Minerals Institute Report (12.27.2023): Politics Driving Marketable Commodities into 2024 (December 27, 2023, Source) — The December 2023 Critical Minerals Institute report highlights key global economic and political developments influencing the critical minerals and electric vehicle (EV) markets. U.S. inflation decreases and potential interest rate cuts in 2024 have positively impacted equity markets, while China’s anticipated economic recovery bodes well for commodity sectors. The EV market is experiencing significant growth, particularly in China, despite challenges from U.S. and EU policies aiming to reduce dependency on foreign entities. The U.S. Department of Energy’s proposed FEOC guidelines and the EU’s Critical Raw Materials Act reflect a strategic shift towards stabilizing and localizing critical minerals supply chains. The report also notes significant fluctuations in the lithium market, with expectations of a bottom forming soon, and discusses the broader market dynamics of other critical minerals like cobalt, graphite, nickel, and manganese, in the context of a global economic slowdown. The performance of uranium in 2023 and the potential impact of lower interest rates in 2024 on the global economy and critical minerals demand are key areas of focus.

Chile’s Codelco to control new lithium venture with miner SQM (December 27, 2023, Source) — Chile’s state-owned copper miner, Codelco, has entered into a significant partnership with mining company Sociedad Química y Minera de Chile S.A. (“SQM”) (NYSE: SQM), gaining majority control in a new lithium venture. This move aligns with President Gabriel Boric’s directive for greater government involvement in lithium production. Chile, holding the title of the world’s second-largest lithium producer, aims to revitalize its market share, which is at risk of declining due to aging mining projects and increasing global competition. The deal, marking a pivotal step in Boric’s national lithium strategy, mandates public-private partnerships for all lithium projects. Set to start in January 2025, Codelco will take over SQM’s existing contracts and collaborate on increasing lithium production in the Atacama Desert. This partnership is not only a strategic move to stabilize SQM’s market position but also sets a precedent for future lithium contracts in Chile, potentially reshaping the country’s role in the global lithium market.

Global Rare Earths Market Heats Up as China Implements Export Ban (December 21, 2023, Source) — The recent ban by China on the export of rare earth processing technology represents a pivotal moment in the global rare earths market, particularly impacting the strategic metals sector. This ban, covering technology for extracting, separating, and producing rare earth metals and alloys, along with some magnet production technologies, has significant implications for industries like electronics, clean energy, and defense. Experts from the Critical Minerals Institute, including Melissa Sanderson and Peyton Jackson, highlight the necessity for the United States to proactively respond by investing in both green technologies, such as bio-extraction, and traditional processing methods. They emphasize the risks of over-dependence on other nations and the importance of developing technological self-reliance. The U.S. government’s funding of Lynas Rare Earths Ltd. (ASX: LYC) and Energy Fuels Inc.’s (NYSE American: UUUU | TSX: EFR) advanced solvent extraction system exemplifies a shift towards addressing these challenges through domestic initiatives. This strategic move is not only a reaction to China’s export ban but also a step towards ensuring a more sustainable and secure future in the critical minerals sector.

Allkem shareholders approve $10.6 billion Livent lithium merger (December 19, 2023, Source) — Australian lithium producer Allkem Limited (ASX: AKE | TSX: AKE) and U.S. company Livent Corporation (NYSE: LTHM) have agreed on a significant $10.6 billion merger, marking a major move in the lithium industry. This decision, approved by 72% of Allkem’s voting shareholders, will result in the formation of Arcadian Lithium PLC (NYSE: ALTM | ASX: LTM), a formidable entity in the global lithium market. The merger, which has received all necessary regulatory approvals, positions Arcadium Lithium as one of the world’s largest lithium companies, with operations spanning Australia, Argentina, and Canada. The new company will be integral in supplying lithium, a critical component for electric vehicle batteries, to various battery manufacturers. Under the terms of the deal, Allkem shareholders will exchange their shares on a one-for-one basis for shares in Arcadium Lithium, owning 56% of the new company, while Livent shareholders will receive 2.406 shares in Arcadium for each of their shares. Livent CEO Paul Graves is set to lead the new company, which will be the world’s third-largest lithium producer. The merger comes amidst a surge in dealmaking activity in the lithium sector and is recommended by independent financial advisors and proxy firms. Additionally, Livent plans to expand its operations in Western Australia’s prominent lithium districts.

Singapore’s Atomionics taps gravity, AI in hunt for critical minerals (December 19, 2023, Source) — Singapore-based startup Atomionics is transforming the mineral exploration industry with its innovative technology, Gravio, which combines gravity detection and artificial intelligence. This “virtual drill” technique offers a more precise and efficient method for locating ore bodies of critical minerals like copper, nickel, and zinc. Atomionics has already engaged with three major mining companies and is implementing its technology in Australia and the U.S. The technology’s real-time data processing significantly accelerates the task of defining ore bodies, offering a cost-effective alternative to traditional exploration methods. The ability to build an accurate virtual picture of mineral deposits before physical drilling can greatly reduce costs, as exploratory drilling is expensive and often misses the target. Atomionics aims to decrease these unsuccessful attempts by at least half. This innovative approach holds the potential to be a game-changer in the mineral exploration sector, presenting a low-cost alternative to traditional methods and contributing to the energy transition.

EU sets critical mineral goals, but faces struggle to hit them (December 18, 2023, Source) —  The European Union (EU) has ambitious targets for securing critical minerals essential for its green transition, as outlined in the Critical Raw Materials Act (CRMA), which aims to mine, recycle, and process significant portions of its annual needs for key materials like lithium and cobalt by 2030. These efforts are crucial for manufacturing clean technology products and reducing dependence on China, the dominant player in global mineral processing. However, the EU faces considerable challenges, including funding shortages, high energy costs, local opposition, and the need to expedite project permits. Additionally, the EU’s efforts are comparatively underfunded compared to massive investments in green subsidies by countries like the U.S. The situation is further complicated by higher EU energy costs leading to reduced metal production and delays in mining projects in Portugal and Serbia. Despite these hurdles, there are positive signs, such as potential projects meeting EU supply needs and innovations to minimize material use. The EU also seeks to diversify imports and forge global partnerships, aiming to position itself as a clean tech leader by focusing on high-value manufacturing and relying on reliable allies for mineral sourcing.

Billionaire-backed KoBold Metals widens lithium hunt across four continents (December 14, 2023, Source) — KoBold Metals, a California-based startup financially backed by prominent billionaires including Bill Gates and Jeff Bezos, is broadening its search for lithium, a crucial component in the clean energy and electric vehicle sectors, across four continents. Utilizing advanced artificial intelligence technology, CEO Kurt House announced plans to explore for lithium in regions such as South Korea, Quebec, the United States, Australia, and Africa, with specific emphasis on Namibia and the Democratic Republic of Congo. Previously focused on nickel and copper, with successful ventures in Quebec and Zambia, KoBold is now transitioning to include lithium in its mining portfolio. This strategic move aligns with their long-term goal to become the leading supplier of critical metals within 10 to 15 years. The startup, supported by Breakthrough Energy Ventures, collaborates with major players like BHP Group and Rio Tinto on projects in Australia and Canada. This expansion reflects KoBold’s ambition to fill the exploration void left by larger mining firms, which have recently prioritized operational efficiency and shareholder returns over new mineral discoveries.

InvestorNews Critical Minerals Media Coverage:

• January 3, 2024 – Rare earths company stock price has had a ‘meteoric’ rise of over 21x the past 15 months https://bit.ly/3vo6Xn3
• December 29, 2023 – Energy Fuels announces an MOU for a $122M investment in Astron that will supply a “new U.S.-based supply chain for decades” https://bit.ly/3tzBfm9
• December 29, 2023 – Hallgarten Initiates Coverage of Edison Lithium: Pivoting to Sodium-Ion Battery Technology https://bit.ly/3tG08wq
• December 27, 2023 – The Critical Minerals Institute Report (12.27.2023): Politics Driving Marketable Commodities into 2024 https://bit.ly/48sqnVU
• December 21, 2023 – Global Rare Earths Market Heats Up as China Implements Export Ban https://bit.ly/3TAClsv
• December 21, 2023 – Setback for U.S. Rare Earth Industry: China Tightens Export Laws on Key Technologies, Impeding American Efforts to Gain Independence Despite Financial Incentives https://bit.ly/4aGvQdQ
• December 20, 2023 – An update on the graphite sector and what to expect in 2024 and beyond https://bit.ly/3v8xLHG
• December 19, 2023 – Australia updates their Critical Minerals List and Adds a second, introducing the Australian Strategic Materials List https://bit.ly/3RQx7aG

InvestorNews Critical Minerals Videos:

• December 30, 2023 – Jack Lifton with Mark Chalmers on Energy Fuels Rare Earth Deal and Increasing US Uranium Production https://bit.ly/3TM5wsK
• December 30, 2023 – Mark Chalmers of Energy Fuels Discusses Increasing Uranium Production in the United States https://bit.ly/3TDPH7k
• December 30, 2023 – Energy Fuels’ Strategic MOU with Astron: Shaping the Future of the U.S. Rare Earths Supply Chain https://bit.ly/41PPujp
• December 18, 2023 – Ucore’s Strategic Leap: Pat Ryan Discusses the First Mover Advantage in Rare Earths Processing at Louisiana’s Strategic Metals Complex https://bit.ly/3GKa2jL

Critical Minerals IN8.Pro Member News Releases:

• January 4, 2024 – Ucore Acquires Alexandria, Louisiana, Facility for Rare Earth Element Processing Plant https://bit.ly/3RJCQOs
• January 2, 2024 – Panther Metals PLC Corporate Summary: Positioned to Succeed https://bit.ly/3tDKSQI
• January 2, 2024 – First Phosphate Closes Second Tranche of Oversubscribed Private Placement for Total Current Financing of $7.5 Million https://bit.ly/48jDCbP
• December 29, 2023 – Panther Metals PLC: Obonga Project Awkward East Claim Purchase Agreement https://bit.ly/3NKBeTr
• December 28, 2023 – Appia Rare Earths & Uranium – A Year in Review https://bit.ly/48xo3gh
• December 28, 2023 – Kraken Energy Receives Permit to Resume Phase I Drill Program at Harts Point and Provides Corporate Update https://bit.ly/48pALxM
• December 27, 2023 – Energy Fuels Enters into MOU to Secure Near-Term, Large-Scale Australian Source of Rare Earth Minerals to Supply New U.S.-Based Supply Chain for Decades https://bit.ly/47lDF5v
• December 27, 2023 – Ucore Comments on China’s Ban on the Export of Rare Earth Technology https://bit.ly/3RYiimD
• December 27, 2023 – Appia Announces Closing of Non-Brokered Flow-Through Private Placement https://bit.ly/41EDIbJ
• December 27, 2023 – Defense Metals Completes Geotechnical Field Data Collection for Wicheeda Rare Earth Element Project Preliminary Feasibility Study https://bit.ly/3RGLehB
• December 27, 2023 – F3 to Spend $16 Million on Drilling at PLN https://bit.ly/4aCQwDc
• December 22, 2023 – First Phosphate Announces Closing of Initial Tranche of Private Placement Financing Along with Date of Second Tranche Closing https://bit.ly/48LgHWR
• December 22, 2023 – Ucore Announces Extension of Debt https://bit.ly/3S7KAev
• December 22, 2023 – Fathom Nickel Announces the Closing of the First Tranche of Private Placement https://bit.ly/3S6aCyF
• December 21, 2023 – Imperial Mining Closes $1M Critical Minerals Flow-Through Private Placement https://bit.ly/4aEEsSh
• December 21, 2023 – Western Uranium & Vanadium Provides Market and Company Updates https://bit.ly/3tyzFAP
• December 21, 2023 – Ucore Completes RapidSX(TM) Demo Plant Commissioning – Begins US Department of Defense Demonstration Program https://bit.ly/3tjI4Iz
• December 21, 2023 – In Response to Surging Prices, Supportive Government Policies, and a Domestic Focus on Security of Supply, Energy Fuels Has Commenced Production at Three of its U.S. Uranium Mines https://bit.ly/3Ru3Lxv
• December 20, 2023 – Panther Metals PLC: Financing Update https://bit.ly/41OC3jB
• December 20, 2023 – Critical Metals PLC advances the Molulu Copper-Cobalt Project in DRC https://bit.ly/3ts5TxH
• December 19, 2023 – Auxico Announces Board Decisions on Key Assets and Filing of Technical Reports https://bit.ly/3TyNxFY
• December 19, 2023 – Automotive OEM Validates Nano One LFP and Kicks Off Tonne-Scale Evaluations https://bit.ly/48g4KZ6

In a television address on Thursday evening, Chile’s president Gabriel Boric announced plans to nationalize the country’s lithium industry, with massive implications for the booming lithium industry.

The left-wing former student leader set out his government’s strategy for developing the huge lithium resources, including the creation of a state-owned National Lithium Company to lead the sector and partner with companies to develop the lithium projects but with state control.

The prospect of state intervention in natural resources would normally send investors running for the exit. Could this time be different? Under Cold War-era rules, lithium production in Chile is strictly controlled with only two companies, Albemarle (NYSE: ALB) and SQM (NYSE: SQM), entering production in the last four decades.

To break the deadlock, the National Lithium Company would be empowered to form joint ventures with private investors to develop lithium production in the salt flats that dot the Andean Mountains.

State-owned copper producer Codelco, one of the largest copper producers in the world, will lead the transition until the new National Lithium Company can be set up. President Boric’s plan still needs to be approved by Chile’s National Congress which is expected to be debated later this year.

This announcement follows Mexico’s legislation last year to ban private and non-Mexican lithium mining and processing activities and restrict all future projects to state-run companies, and the recent discussions amongst leaders in Argentina, Chile, Bolivia, and Brazil to form an OPEC-like cartel for the lithium industry.

According to the USGS, Chile was the second largest lithium producer in 2022, behind Australia, with China third, Argentina a distant fourth, and Brazil fifth. Chile has the largest lithium reserves, while Bolivia and Argentina have the largest overall resources.

Here are some of the firms operating in Chile that could be impacted:

Albemarle Corporation (NYSE: ALB)

• ALB is a global leader in engineered specialty chemicals. The company produces lithium, bromine, and catalysts for various industries, such as electric vehicles, flame retardants, and oil refining.
• The company has operations in Chile, where it extracts lithium from brine deposits in the Salar de Atacama, and an existing joint venture with Codelco to explore and develop new lithium resources in the country.
• ALB has a market capitalization of over US$24 billion and employs about 5,600 people and serves customers in 100 countries.

CleanTech Lithium Plc (AIM: CTL)

• CLT owns claims on three Chilean salt flats, the largest of which – Laguna Verde – is estimated to contain 1.5 million tonnes of lithium carbonate equivalent (“LCE”).
• Using Direct Lithium Extraction technology, which avoids the need for large and wasteful evaporation pools, the company plans to build an operation that could produce around 20,000 tonnes annually LCE by 2025.
• CLT has a market capitalization of approximately £60 million.

Lithium Power International Limited (ASX: LPI)

• LPI controls one of the most advanced private lithium projects in Chile. With an environmental license and export permits already in place, it is already in talks with financiers to fund its US$626 million Blanco project on the Salar de Maricunga which could produce around 20,000 million tonnes annually of lithium carbonate over 15 years.
• The company now expects the government to name the project as the country’s newest lithium project through a partnership with the state.
• Its market capitalization is approximately A$167 million.

Sociedad Química y Minera de Chile S.A. (“SQM”) (NYSE: SQM)

• SQM is today the world’s largest producer of lithium and ramped up production from the claims it rents on the Salar de Atacama to keep up with booming demand. But it has said future investments are conditional on reaching a new agreement with economic development agency CORFO, which owns the claims, on its rental contract which expires in 2030. So far, these talks have got nowhere.
• But investment bank JP Morgan thinks the announcement of a new policy could be positive for the firm by facilitating a new deal with CORFO while the creation of the new national lithium company, which requires the approval of Congress where the government lacks a majority, could take several years.
• SQM has a market capitalization of over US$22 billion and employs about 7,000 people in 110 countries.

Wealth Minerals Ltd. (TSXV: WML)

• WML owns mineral claims on the southern part of the Salar de Atacama which today accounts for around a third of global lithium production and 15% of known lithium reserves.
• The salt flat boasts lithium grades of more than 1,800 micrograms per liter (“mg/l”), compared to 1,250 mg/l and just 740 mg/l in Salar de Hombre Muerto in northwest Argentina where Livent Corporation (NYSE: LTHM) operates its main lithium operation.
• WML has a market capitalization of approximately C$110 million.

Figure 1: South America’s Lithium Triangle

Investing in the stockmarket is part science and part art. The science part refers to the fundamental analysis and the art refers more to the instinct/understanding and timing of investments. What truly sets great investors apart from the average are two things – Spotting a winning trend early and investing when there is a market disconnect caused by negative sentiment.

Today’s article is about just that. The winning trend is the EV and lithium boom, and the disconnect is the recent lithium price gains while the lithium miners stock prices fell. Did you know that in the past 3 months lithium carbonate spot prices in China have more than doubled (up ~125%), yet lithium miners stocks have fallen in many cases by 25% or more in the same time period?

China lithium spot prices are up ~125% in the past 3 months and 10x the past 14 months

Source: Trading Economics

The chart below shows the stock price falls of several lithium producers and one highly promising junior. In the past 3 months (as lithium prices more than doubled) Albemarle Corporation (NYSE: ALB) has fallen 32.40%, Livent Corporation (NYSE: LTHM) has fallen 28.43%, SQM (NYSE: SQM) is down 6.20%, Ganfeng Lithium (HK: 1772) is down 9.53%, and Lithium South Development Corp. (TSXV: LIS) is down 35.35%.

Leading lithium miners’ stock prices the past 3 months have fallen significantly

Source: Yahoo Finance

Why have lithium miner stock prices fallen when lithium prices have surged higher?

The answer as to why is as follows:

• Several lithium miners sell their lithium on contract prices which are yet to properly reflect the market spot price for lithium. As these contracts expire they will be replaced with much higher contract prices or spot prices.
• Macro events and market sentiment – The general market has been selling off with the S&P500 down about 10% from its peak due to U.S. interest rates soon to rise and more recently the Russia-Ukraine crisis. Of course, this will pass and has almost zero impact on EV sales and/or lithium prices. In fact, current very high oil prices are helping EV sales. In my situation my new electric car costs me $17 to drive 420kms compared to $75 for my old gasoline car, that’s about 4.5x less. Servicing costs are almost zero, with the main cost being tire replacements.

The recent disconnect between the more than doubling of lithium prices and lithium miners stock prices falling would only make sense if the sector was in trouble, yet EV sales are setting new records, up 108% in 2021, and look set to grow well above 50% each year this decade. Lithium demand is forecast to grow 11x this decade with most analysts forecasting growing lithium deficits. So we have a winning trend and a huge disconnect caused by macro factors (Russia-Ukraine conflict, rising US interest rates). Great investors can see this huge disconnect and will move now to profit from it.

Two popular ETFs that track the stocks of EVs, batteries, lithium and EV metal companies also tell a similar story, having both fallen the past 3 months. The Global X Lithium & Battery Tech ETF (LIT) is now trading on a PE of just 26 and the Amplify Lithium & Battery Technology ETF (BATT) trades on a PE of only 21. Considering the sector’s growth rate of well above 50%pa, this is plain crazy.

A final example could be Tesla (NASDAQ: TSLA). The stock is down 26% over the past 3 months despite reporting its best ever results in Q4, 2021 and smashing the competition. Tesla had an outstanding 2021 growing revenues 71% YoY and GAAP earnings by 665% YoY. Total vehicle production grew 83% YoY. 2022 looks to be even better for Tesla with 2 new gigafactories set to open and production likely to grow from ~936,000 electric cars in 2021 to somewhere near 1.7 million in 2022. One more key factor highlighting global EV demand, Tesla has an estimated 1.3 million pre-orders for their Cybertruck. In total Tesla’s pre-orders are so high that they don’t even accept orders for Model Y in many countries as they cannot meet demand for some years.

Tesla’s electric cars have huge waiting lists and well over 1.5 million pre-orders

 

Closing remarks

All forms of lithium prices (spodumene, Li hydroxide, Li carbonate) have been surging higher the past 14 months. In particular, the China lithium carbonate price has surged 125% higher the past 3 months, while leading lithium miners and others fell between 6% and 35%. Albemarle, the leading lithium miner, has fallen 32% in the past 3 months. This is a huge disconnect, and frankly what great investors dream of. I will be topping up my positions in the EV companies and lithium miners as the EV and lithium boom has only just begun and current macro events have opened up a huge buying opportunity for investors. The last time I saw this happen was in the March 2020 Covid-19 low, with many lithium stocks surging higher once market sentiment improved.

My view is that the lithium miners are currently like a tightly sprung coil. As soon as the market sentiment and macro issues improve that coil should spring open propelling lithium miners stock prices higher and closing the current huge disconnect.

Don’t miss this opportunity to buy into ‘white gold’ as lithium becomes the most critical element of the modern era.

Disclosure: The author is long all the stocks and ETFs mentioned in this article.