Lithium names

PLS (Pilbara) and MIN (MinRes) posted quarterlies that were ahead of market expectations, with costs managed better than peers (SYA, LTR) and production stories that remain broadly intact.

By comparison CXO (Core Lithium) Sayona (SYA) and Liontown (LTR) all have projects that are now under review.

IGO also has projects under review, but this is for the nickel assets, and nearly every player in nickel is in the same boat.

We’ve long held the view that lithium would be technologically superceeded by sodium ion batteries, and would go the same way as nickel cobalt manganese (vastly lower demand leading to a collapse in mineral prices), and given that lithium is down some 80% or so from peak, that view has been bourne out.

Perhaps PLS and MIN and IGO will run away from here, as their peers struggle, given that the market is forward looking and will assume the outcomes imply supply side removal.

Certainly possible. Also, perhaps other suppliers, whom we don’t keep track of quite so well (for example, reading the headlines today of a new lithium deposit in Thailand, that someone is looking to commercialise, the point being that you can only be “so familiar” with new entrants when the gold rush equivalent of production is underway) keep the market well supplied, such that no bounce comes over 2024.

If that latter scenario occurs, than PLS is probably trading somewhere north of 23x earnings, and you can buy other commodity producers with a similarly uncertain future at half the multiple. I think you can also make the case that the PLS multiple expansion (the earnings dropped by more than the price) suggest the market is still reasonably bullish on PLS (although even here I water down my statements given the large short interest outstanding; but I do view that SI as reflective of few large liquid accessible names with which to get stock anyway).

We watch on the sidelines.

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