⛏ Is The Lithium Party Over?

Greetings Contrarian, 

This is another Sunday edition, with a really juicy question that's probably been on your mind lately. Here it is:

Happy Passover, Clean tech wonderer!

Alright, this is a super timely question and yes, we have a hunch. 

Capital allocation by governments, specially in the West, is often misplaced, whether it be where or when capital is allocated, notwithstanding the fact the skin in the game is taxpayer’s skins… but we digress. 

Mismatched capital allocation is precisely where you want to be. Criticism regarding what the government is subsidising at any one time is relevant for taxpayers only.

The true speculator is opportunistic and makes this unnatural investment trend a massive opportunity.

Any surfer will tell you: swim with the rip current, not against it. If you try, you will drown.

According to Benchmark Mineral Intelligence, almost 400 new mines will need to come to production for the world to meets its already committed 2035 decarbonisation goals. 

If you’ve been in mining longer than 5 minutes, you know that to be a complete impossibility. 

So let’s play around with some scenarios:

1- Governments throw money at, subsidise, (kinda) fast rack permitting of critical mineral mines, and we miss the target by a lot, but by the time we concede, many billions are already at work. We make money all the way to the top. 

2- Governments all concurrently conclude, in the next few months, that the whole notion of a) energy independence b) industrial independence  are not worth pursuing, and cancel all future “artificial demand” for said minerals. We possibly lose money. 

What is your guess between these two scenarios?

One concern is price action currently. And to compare this, we'd like to pose the question:

"What decade-long super trend has had a chart that is up and to the right without interruptions?"

Think the dot com bubble, China joining the WTO, ZIRP, crypto. Multi-year trends with massive volatility and ever-increasing gains and participation.

This is our second or third lithium cycle, but until we define a better/faster/cheaper/safer material, lithium is the bread and butter of EVs.

The lithium price is suffering in the short term and we will not go into the rumours that the Chinese may be manipulating the price down to secure supplies/market share, because we don’t know if that’s true. 

All we know is that right or wrong, our overlords who print our currencies have made it crystal clear where they’re putting your their currencies into.

Are we early or late?

Simply by looking at current prices, current market share of EVs and gov policy, you can draw your own conclusions. 

We will not get to 400 mines in the next decade and a half. But the demand that’s being forced by government mandates is like playing poker with someone who’s drunk, blind, and showing their cards. 

Ignore at your own peril. 

Wait for equities to settle lower as sentiment turns negative, then buy what’s cheap according to current prices. 

Diversify jurisdictions and commodities. 

All really good trends go longer than you think. 

Happy speculating, 

The Editor

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational/entertainment and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.