[Music] I'm Priscilla Barrera with the investing News Network and here with me today is Rodney Hooper of RK Equity Romney thank you so much for joining me today great to speak to you again Priscilla so I wanted to start by asking you about the lithium market performance so far this year we're almost entering the second half of 2023 did the market performance expected at the start of this year I think we were caught a little bit off guard based on my numbers of supplier demand actually what we saw last year


was a greater deficit than expected as the as a sort of Downstream stocked up and then we started the year with a bit of weakness in China with EV cells that's come back as of May up about 43 year on year so an improvement there was a sort of buyer strike at higher prices so Downstream is definitely pushing back on lithium prices anything above sort of 50 for sure seems to be unpalatable for them so to answer your question caught a little of God but we seem to be moving back to a stable region and we've kind of what I


call the economics of lithium are sort of playing out as expected if you look at the linkage between Spider-Man and chemical prices and add a bit of a margin it's kind of come back to that number so more predictable and um yeah I expect we can chat about the future but yeah we've come back to where I think is a fair position at the moment for the year but a bit of a fright for the start but we're seeing a demand pick up and uh when it comes to prices we've saw prices fall from November to April we're now


seeing uh leaking prices rebound what do you expect to see for the rest of 2023 so on that front it's interesting with the um with the drop in prices we are we chat to the entire upstream and downstream as well as Traders and I was warned there was going to be a buyer strike they suggested the price would pull back to around 320 of course it went straight through that and further below um but looking for the year ahead I think still and I've said this before um I believe that Spider-Man as the


feedstock is the sort of marginal producer in the market not lepidula to that being the case um the price of Spider-Man was still effectively on a look through basis dictate the price of chemicals so that at around four thousand dollars a ton if you check my presentations correlates to roughly around three hundred thousand REM NIMBY as a price that inclusive with a small margin in it I do think that people are grossly underestimating energy storage demand for the year and for the future every presentation every


analyst forecast I see is way too low I've spoken to various people along the chain and China and so I'm expecting big things there so if we see a recovery in EV demand okay up towards the end of the year I think ESS can add to that and we could see something of a price squeeze you know or slightly higher prices towards the year end um I don't know if that will you know have a have Spiderman running with it but I I do think there's potential for producers to hold back a bit of volume


and cause a bit of an upward vacuum in in prices but we'll see as I said the downstream doesn't like higher than 50 but they aren't always in control and um when it comes to leaking Supply you've been talking for a while now about this structural Supply shortage what factors do you think could derail that prediction if anything so what could have derailed it is is high inflation and a recession so disposable income because the one Trend that does sort of play on my mind Priscilla is is the cost


of EVS needs to drop you're still you know the offering that is in the States and China is starting to send byd introduce the seagull 11 000 and some of the others but X China the price of EVS is still quite High which means it aims and is targeted at a certain buyer's market and that's not infinite when the early adopters can switch to EVS that you know they they will and have but that market is not infinite you need to be able to produce attractive competitive EVS in the twenty to forty thousand dollar range and


that's not happened yet because of battery raw material prices so a derailing could be effectively a blowout in demand where where EVS just aren't affordable to a big enough math that hasn't happened this year China's picked up a lot of the slack it's it's got very aggressively priced models and they seem good sales but as you know this thematic Needs to Go Global so we are going to need to see better priced offerings so not this year but a derailing in the future is we need


to see lower priced EVS even after subsidies it's it's got to come down all right and uh one of the things we have continued to see this year is oems getting more involved in the Upstream um what do you think are some of the risks and challenges of oems partnering and investing equity and mining companies and how do you think all these Partnerships will evolve so I think one of the things is it's been you know thematically and optically appealing for oems to put money into dle and new technology plays because they


low carbon or zero carbon or net era um and what we've seen is cost blowouts and production timeline blowouts from them across the board I would say so that's not to say that those projects won't work in time Etc but how much will they cost when will they reach battery grade because this is what oems need the dilemma I guess they face to some extent is that conventional flow sheets are the projects that can get you your lithium in early stage now sooner so the risk is in investing in something


that's palatable to ESG related shareholders and to PowerPoint presentations but there's a reality if you want to make EVS um and there is more of an acceptance from the downstream and the oems to invest in projects that have zero carbon to put the money in they're more reluctant where there's more mining related what you know people consider I I don't agree we've had Ken Princeton before on our podcast degree you know there are ways to bring down CO2 Emissions on conventional flow sheets


and I think that should be a focus for people because it will um it you know it can assure you of your material and and prove to be you know lower on the on the carbon scale so oems have stepped up they've realized the need to do it we know despite various brokerages you know saying that there's going to be oversupply we know incumbents and other other Market sector companies looking to get into lithium and looking at companies that we consult and work with at very early stage which contradicts


an oversupply argument so um I'm sure you're going to get to it My Philosophy is still again that oems cannot just secure volume if they give funding if they if they give prepayments if they manage to somehow get a discount on the material that's great but it needs to be enough that they can make it work and to my mind if you want to be competitive in the long term you need to secure on the basis of supply and price so when it comes to new Supply I think one of the region regions that has been


receiving some attention is Africa so what do you think of potential Supply coming from the continent and what should investors maybe pay attention to when looking at companies developing projects there so Africa is my Homeland um and you know it's had an interesting if not troubled history in the mining front that said you know Leo this team's been a great project I think that's going to play out for ganfin well I think that could be a very large asset in time it is quite far from coast it is in Mali but there are


you know that share price has performed well Howard and I from a from a technical perspective in terms of grade and quality and and potential you know that's been too good to ignore you've got Atlantic lithium again you know it might it's in a good mining jurisdiction as far as Africa is concerned paved roads deep water Port so on you know Zimbabwe I think one has to be careful you know Zimbabwe has imposed you know they buy electricity from South Africa South Africa now doesn't have


electricity so Zimbabwe is without powerful sometimes as much as 18 20 hours a day which means you know difficult circumstances they want to beneficiate in country so you've got to look at it country by country I think China has rightfully decided that's where they are going to get their material because tier one jurisdictions are trying to do vertically integrated deals or deal with Europe or elsewhere so Africa has the material can it you know in terms of how long a lifespan that will be in terms of the quality in


terms of the reliability and political regime you need to do your homework but you know there has been a long history there and I think that um that that will fill a percentage of the market but I don't you know I don't think it can rise up to meet you know what is you know a quickly expanding Market all right and what about Canada I guess is my next question we've heard a lot about Quebec we also heard a lot about how the government continues to push for more Partnerships when it comes to raw


materials how optimistic are you about Supply from Canada so I wouldn't neglect Ontario along with Quebec and there are other provinces you know lifts is doing you know a project elsewhere so as far as early exploration and opportunity in finding big Resources Canada is fantastic because it's underexplored for lithium and I do think you know I don't argue with Elon Musk when he says lithium is abundant it is abundant it's a question of economic resources I do think like the Patriots like the win Sims that


have come up now they're looking to come out with good resources there will be more um I think you have to be realistic Australia is still Top Dog in terms of timelines to production pilbra showed it from first drill to production in four years and if you look at the rate that Global lithium is accelerating its projects you know it shows what Australia can do when they Flex their muscle they can move really quickly and that's an example of a project that you know Canada can't meet those sort of


timelines but I think there are fantastic deposits I think you know that the North America is looking to have an insular supply chain the IRA will I think benefit Canada but you just have to you know be realistic about uh the permitting and time to production but I think in terms of quality of resource and Sovereign of resources again another one I'd mentioned Frontier that's on its way to a big Resource as well but you've got to look at infrastructure you're going to look at permitting and


then um you know what are you going to do with the material are you going to set up a hub in Thunder Bay are you not are you going to ship it to the us but we like Canada again everything has a price you asked me this I think when I saw you last year um I think you've got to look where things are fairly valued and where there's opportunity for upside you know things get ahead of themselves then it's tough I think that's what some of the new technologies they people started to discount them on the basis of npv when


the proof of concept wasn't quite there yet um so I like Canada we have backed it we think that it is going to play a role in the future but one has to be realistic on timelines all right and I wanted to Circle back on dle and um just maybe what are your thoughts on companies betting on Direct lithium extraction and what do you take into account before investing in a company claiming to have any kind of Technology technological breakthrough so you know dle was the flavor of the month or the


year last year for a period of it and how it's and I said look we'll see now they are all sort of near their 52-week lows so the market has soured on that a bit again I think dle is an opportunity but it's an option value you can't value it on the basis of it'll produce X and discount it as you would a hard rock or brand you know deposit um I do think there is potential for more applications uh like livant users dle I think there's some good brand projects you've got you know gallan


looking to make an intermediate product a product I think that's quite a smart play um but I I guess the way I look at dearly opportunities has always been to Value it as optionality rather than as a project any sort of cash flow discounting and so on and I think the market is now decided that is probably more the way to look at it dle is needed but one has to remember that it's like a fingerprint you know every fingerprint is different in the same way every brand is different and how you need to treat it


I will say as a broad consensus the capex costing for dle projects has blown out their numbers are just I'm seeing around 60 000 for a few of them and I don't think that's the last of it so you know it's a big bet on a on a new on a new technology but it is needed it would fit very well in the ESG narrative so you know we hope that it does work but again we felt the timelines need to be more realistic in terms of building up pilot plants or or projects on a stage by stage basis and then seeing that they


pan out so we're not anti-diarly we think that it is an opportunity but you need to pay if what I consider an option premium for it and you need to be very realistic on the timeline and and the costs but you know we're seeing high prices now we think that those can be sustained for a while so we are more inclined to be Keener on near-term production conventional flow sheet or you know brand Hard Rock obviously we've done because there's conversion capacity out there to take it but we also probe Brian


in the sense that if you're up and running and almost there that's great because it's they're low cost producers we need to see daily proof of concept here at scale in the Western World I know it's done to an extent in chiangai you know in China but I don't have looked through as to the quality of that material and the true costs and so on so I'm still waiting to see a flagship project you know in um in a tier one jurisdiction outside of China Rodney my last question for you today


would you be able to share any key lessons you've learned this past year when it comes to investing in lithium slash battery metals sure interesting question um I think investors still need to be very cognizant of global macro factors you know we think we get a little bit of you know a bit of a myopic view of um you know our little sector and and our so we've seen different headwinds inflation Ukraine war you know a possible recession and so on actually affect the lithium Market when the fundamentals within the lithium


Market have looked to be sound so lithium is not a commodity it is a specialty chemical I mean Spiderman I guess you could draw you know analogies to other Commodities and maybe think of that as more but it means that there is cyclicality in in the process in the price of the of the um chemicals and Spider-Man and in the share prices so I think you know investors would do well to take money off the table when they've had substantial returns and look to re-enter when you know when shares have


been beaten down I think the buy and holds you know you need to be brave that's not to say you shouldn't it's just there are buying and selling opportunities given the world that we live in all right Rodney thank you so much for joining me today thanks very much [Music] thank you for watching if you like this video make sure you subscribe to our Channel we'd also love to hear your thoughts so leave us a comment below we'll see you next time [Music] foreign foreign