Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hi James, I am a recent follower of MM and am interested in your view. I have been slow to buy into the lithium theme after the 2020 covid fall. All the lithium stocks came down like a stone today after announcement from Brazil. I do not own any lithium stock directly at the moment. Is it a good time to buy and which of the lithium producer and developer does MM like the most and why? All the best to you and your team. John
Hi John,
Lithium ties into the electrification thematic that is taking over the globe. The reason for the hype is lithium has unique characteristics that are difficult to replicate. It is a light metal but is able to store large amounts of energy and is an excellent conductor of electricity. Furthermore, whilst other minerals used in batteries are subject to uncertainty around different chemistry choices, lithium demand is relatively immune to these risks. Demand for lithium has grown at ~20% compound annual growth rates through 2017-22 and we think that will continue, while Lithium deposits that are technically and economically viable to exploit are rare. This all paints a positive backdrop for the sector, and particularly the higher quality hard rock producers in Australia – the question comes down to timing.
We recently bought IGO which is highly correlated to fellow battery metal stocks on the ASX – we like IGO given it also has a very solid Nickel business that has been expended through the sensible purchase of Western Areas (WSA). We do like Pilbara (PLS) and Allkem (AKE) but it’s undoubtedly a crowded play as are most themes with a green bias. For that reason we have left room to average our IGO position into weakness while we are also contemplating adding PLS or buying Allkem in the Emerging Companies Portfolio using the same philosophy.
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