The lithium price has taken a steep drop over recent months, as wider concerns about the state of the global economy continue.
Yes, lithium is the metal of the future. But the future at the moment is uncertain: inflation still lurks, the aftershocks from supply-chain disruption are still here, and war looms on more than one horizon.
What’s more, certain high-minded aspirations, like net-zero, are being chiselled away by a harder-nosed pragmatism.
In the UK, elections must come soon, and in the US they’ll take place in just over 12 months. Still, some trends are here to stay. Net zero, ULEZ and Blade Runners aside, there’s little doubt that electric cars remain the vehicle for the future.
Policy-makers around the world love the idea of electrifying vehicle fleets. Even in China, where the rising use of coal-fired power shows that global warming isn’t the number one consideration, there’s the issue of cleaner air in cities.
Whether or not electric vehicles are ultimately powered from burning coal or harnessing solar and wind, they’ll all still need lithium.
And whether or not electric vehicles are ultimately powered from burning coal or harnessing solar and wind, they’ll all still need lithium.
China already has more electric vehicles than anywhere else, and a combination of subsidy, soft coercion, price competition, and genuine consumer satisfaction look set to keep the market there buoyant.
So don’t count lithium out quite yet. In fact, the current low prices could well represent the last major opportunity to buy on the dip before the permanent re-rating that will arrive when petrol vehicles are phased out for good.
But it’s not that easy to get direct exposure to lithium as a commodity. Unless you buy its miners.
Because lithium miners are well represented on the UK stock exchanges and, as a group, have been somewhat depressed by wider weaknesses – in the lithium price, in the mining sector, and in the global economy in general.
But there are success stories too. Cornish Lithium has recently received a huge vote of confidence in the form of a £53.6million financing package from institutional and governmental investors, which it then topped off with a further £5.1million from crowdfunding.
The company’s chief executive Jeremy Wrathall has been spearheading a re-invigoration of Cornwall’s traditional staple industry, and has been one of the driving forces behind a series of Cornish mining conferences.
And it may be that lithium is at the forefront of the mining ‘renaissance’ that the most recent conference heralded.
Cornish Lithium has brine and hard rock deposits, and other companies have similar types of assets scattered across the county and occasionally tipping over into neighbouring Devon.
Among the more familiar are British Lithium, and Cornish Metals. Does the crowd-funded Cornish Tin have lithium too? – it just might. Investors focussed on UK markets have a few companies with overseas assets to consider too, if they are interested in direct exposure to lithium.
In the USA, Bradda Head (2.5p) has a swathe of projects, in Europe, European Metals Holdings (33.5p) is well positioned in Central Europe, while Savannah Resources (3.4p) has a major project out west in Portugal. And in Africa, Kodal Minerals (0.45p) , Atlantic Lithium (24.8p), and Andrada Mining (5.8p) all have sizeable assets.
What’s more, many of these companies are either in, or close to, production, meaning that much of the risk that’s traditionally associated with earlier stage mining companies has now been priced out.
So, they have much to recommend them, both individually, and as a group. First off, they’ve all suffered downward pressure on their share prices because of the weaker lithium price.
And that pressure won’t be around forever. Second – although it may look bad in lithium mining at the moment, it’s a lot worse in other parts of the mining sector.
At least the companies in lithium have been able to make progress with their projects.
Third – institutions like lithium companies because of their ESG connotations. Fourth – so do governments. And governments also like them for the jobs, tech and knowhow that they bring.
Finally, how established really is globalisation? – or are we going back to individual trading blocs like we had at the start of the twentieth century. If so, sources of supply for key commodities are going to become increasingly strategic from an economic and a political standpoint.
Lithium miners with assets outside of the Chinese sphere of influence are more than likely to come at a significant premium.
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