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 [Music] thank you I'm Priscilla Barrera with the investing News Network and here with me today is our client of RK Equity Howard thank you so much for joining me today thanks for having me back Priscilla it's been a little while yes and uh we are here at the fast markets lithium supply conference where you gave a presentation about the leafy market and you mentioned your first fast markets lithium event you attended was in 2016 to start wanted to ask you how have you seen the themes at this conferences change when it comes

to lithium supply demand Dynamics and what challenges remain the same for the industry well 2016 I mean my presentation went back to 2009 when I started in this industry when I was representing for the first seven years until 2016 I only represented what is now you know the Thacker pass project so um but I never really knew about this conference or was aware of it but never attended but in 2016 um you know lithium prices had started to rise in late 2015 and by 2016 the other some Australian companies that

were doing well um and like pilbara had just started you know oraclebre you know the lithium 1.0 vintage companies like oraclebra I think Galaxy I don't know if it was just emerging from bankruptcy then but um I was a bit ahead of my time from a like a a SPAC a special person's acquisition company had hired us to um because I saw it was a gold top Kaplan was kind of focused on gold gold was kind of quiet and uh lithium was hot and spax generally need something that's hot to kind of transact and as a result

of work we had done lithium Americas had at that time merged with Western lithium and they had attracted sqm as an investor at the time and uh so and it was game on uh you know macri had just been elected in Argentina there was a major rush into Argentina so you're asking about like the change that was like Argentina and your Argentine right so Argentina was crazy hot and interesting and attracted some capital a lot a fair bit of capital and new startups um in 2016. so I was here I'm just trying

to remember back then I introduced that spag and that's how I met people like Ken Brinson at pilbara you know Peter sacker Rebecca Nora gibarasa at nemaska and they were all very interested to hear about you know a billionaire investor that had a 200 million dollar kind of us listed vehicle to respectively um uh you know capitalize their companies but um electrum were gold guys and they never fundamentally got comfortable with lithium so they kept looking at all these deals and then they they couldn't

get comfortable with the supply of demand they just and lithium is just very different than base Metals so that's still true of a lot of kind of gold investors-based Metals investors um so there's been a lot of evolution I mean Argentina has been hot you know been less hot although a lot of those 2016 in 2017 kind of um exploration companies ended up getting sold in 2021 at reasonably High valuation so I mentioned that in my presentation you know that um ryota bought Rincon uh ganfang what

Lithia um lack what Millennial um and uh and and uh by decision you know at reasonably high prices so it just shows you that like if you can raise Capital you know find explore Advanced projects to PFS DFS you know there's a lot Argentina is going to be a major Supply source for lithium it just takes like a really really really long time in brine so uh that's changed a bit there's not like people recognize that South American Brians take a long time they're also well no one was talking about dle in

2016. they were talking about daily a lot in like 20 21 2022 they're still talking about it a bit here but maybe a little bit less so talking a lot about Canada and they're talking a lot about localized Supply chains so we were talking about that back in 2016 that it's coming it's coming it's coming and we were representing Piedmont with him uh Peter and lithium had just started in 2016. and we had raised seed capital for them you know a 10 or 15 million market cap and but it took many many years until

like Tesla kind of you know plucked them out of obscurity in 2020 so four years later um but the whole concept of short distances um and not being wholly reliant on China and especially for Auto markets of the world so America is the second biggest Market China is the first biggest Market but Europe is a a very big you know domestic market so you you can't just be moving product all around constantly so that was talked about but no one was like kind of really paying attention to it the 2016 2017

2018 it was mostly kind of you know Western Australian Spa dreaming that was being sold to China and those were the success stories and those still today are a major source of Supply but now you're seeing with the IRA and other um uh legislation that's been passed in the U.S Europe's slower you know but they are paying attention um they have passed the critical minerals law Etc they're not talking so much about Europe here at this conference I haven't seen that much but this is a U.S conference uh not I mean

it's in Las Vegas so um it is attracting more of a North American um you know bent to it but yeah those are I think that answers definitely let's just talk specifically about what's been happening in 2023 um what trends do you expect to see for the rest of the year in the lithium space and are there any particular catalysts that they are watching out for well 2023 and the presentation I gave is is the year that the auto oems also the incumbent lithium producers have started to get very serious so on the incumbent

producer Side album while I was bidding three and a half billion dollars for lion town a pre-producing company that's a very large number three and a half billion dollars I mean album All bought Rockwood in 2015 for 6.2 billion dollars that was a producing Lithium company and had many other assets in it so three and a half billion dollars is a real number and lion town has rejected it and there are other bidders you know for it so that's serious and then all came in life and have agreed to merge right the

number six and the number four producer into the number three producer so they're basically saying are in our customers you know auto oems battery they want companies that are well capitalized have multiple assets multiple products at scale they don't want to be interacting just with one project company juniors but they have to participate in some of the Juniors as well so the other Trend that we're seeing is we're finally you're seeing um Auto oems take matters into their own

hands and write reasonable checks so uh GM writing a 650 million dollar check into lithium Americas is they're getting into mining essentially right but they're not directly getting into mining but the fact that they're going to own 19.9 of the parent company and that company is Mining and processing chemicals that's meaningful and that's a reasonable check Ford just announced five deals with Albemarle sqm Compass energy source and um aska you know through live it so largely those

were good deals with incumbents so album all sqm live in Nebraska those are incumbents and then they made some dle Bets with compass which is a reasonable company and energy source which is uh among the most advanced dld providers in the Salton Sea so those were good deals those are important deals and then Tesla is building their own hydroxide facility in Texas so they're spending a reasonable amount of money on a 40 to 50 000 ton of hydroxide facility so they get the shortage thesis there they now

after many many years of all of us kind of saying it's coming it's coming it's coming it's kind of sinking in but it's still not fast enough right but so what's going to happen in the second half of the year you're going to have more of that why hasn't I thought it would happen a lot faster after we saw some of these early deals in January another deal was like LG chem wrote a 75 million dollar check into Piedmont what happened was that the lithium price started going down right and whenever

the lithium price is going down right the negotiations happen and um uh and things slow down right they think they're going to get a better deal so there's a bit of cat and mouse uh happening looking price we thought would kind of bottom and then bounce in May it has we're now in kind of like a summer low we're at this fast Marcus Congress this is like there's 1100 people here last year there was 650 and before covid they were typically getting like four or five hundred so this is

like double the normal um and this conference is very much an industry conference it's always been where Japanese Korean Chinese oems meet with and negotiate deals with the incumbent producers so that's all happening on the sidelines of this conference um and everyone's kind of like taking stock look where's the price is again it's cat and mouse but I think there's been some seasonality to lithium Equity performance over the number to the January period which happened kind of last year also it's

happened many other years is it a period of time where you have rallies and the selling may go away kind of mentality has played out over time in in lithium and so that's kind of what I feel um and I've said it many many times you know buy the dip and then you know you'll reach all-time higher love but um that's not the case necessarily across the board it is a stock Pickers Market there are examples like the the dle the dealy experienced the bubble of hype and enthusiasm and valuations kind

of got very high a lot of the dle stories are making progress but it's now in kind of execution mode and there's this Pierre lassan curve um that's traditional in mining where the shows like you make money you know in the early stage exploration and as you're going into production but like in that interim period which could be four five six years where you go to feasibilities feasibility definitive Capital get permitted stocks typically kind of languish during that period before they rise again so a

lot of the dle stories you know are falling in that and and some other um Advanced development stories uh are experiencing that but at the same time you've had like Sigma and you've had core lithium rows as they're going into production um Piedmont we think should follow that trajectory as with sauna they are um getting into production but you've had a phenomenon where there's a lot of export new companies kind of coming and exploration stories like Patriot and Winsome and there are a few others that

are just like defining a resource and there's a lot of like retail speculation kind of going in like how big is the resource going to be what's the appropriate evaluation for it so there's a lot of opportunities there um but some of that is even kind of like tapered off like there has a number of those stocks have flatlined or or fallen in this kind of selling may go away or the week you know um uh spot price the equity Market sentiment is very correlated to where the the carbonate price is

it has recovered it's now kind of stabilizing let's see how it goes uh but we're we're confident for everything my partner Rodney looks at and other data points some traders that I've spoken to here they're they're quite optimistic the Market's quite tight you did have some inventory you know de-stocking uh the Mainer just passed you know uh subsidies again today that's very positive for the market so quite soon you're going to see sustained lithium price Rises and then people can say okay

and they're going to pile back into lithium equities but I think it's important to be selective there are stock picker uh stock picker Market and you know when we look at lithium demand forecasts the number seems to keep going up we've been saying this for a while Supply to meet that demand is still to be seen I wanted to ask you if there were any particular regions or projects looking to bring new Supply online that caught your attention in the past year and why we've been very focused on what I call

the North American lithium triangle okay so that's from Carolina to Quebec to Ontario um spajamine um and Quebec is now you know after a lot of failures I I mentioned this in my presentation just use I always compared Rocking In The Free World you know Nebraska using a Neil Young metaphor and uh you know in lithium 1.0 and lithium 2.0 um Quebec has just had a lot of failures but my my hey hey you know rock and roll is here to stay um in uh Quebec so with sound and Piedmont gonna have their first

shipments imminently right first revenues that's putting Quebec back on the on the map the all chem liven merger nemasket is permitted okay that will go into final investment decision and construction over time they just signed a deal with Ford and then James Bay uh from all chem I think liven is going to be well positioned to be a consolidator and a big player I've compared Quebec to lithium to aluminum right so you have Rio Tinto and Alcoa have I think three million tons of aluminum are produced

and I think one and a half million tons of alumina are produced in Quebec taking advantage of low-cost Hydro you know over the course of like 10 or 12 different aluminum smelters and one aluminum Refinery so I think you're going to have maybe five or ten lithium hydroxide lithium carbonate plants in Quebec but also in Ontario also in Carolina and both North and South Carolina Albemarle is building the 1.5 billion you know megaflex facility and so you're going to see and then you have um Tesla in Corpus Christi in Texas so

like Quebec you know and Northeastern and Southeastern you know North America are going to be you know hydroxide hubs from spodium so that's caught my attention that's caught my attention for the past 10 years but now it's finally kind of coming into fruition Africa as a destination I think is also relevant um you know you got Leo lithium and I think Atlantic lithium and there's some stuff in like private or the Chinese are involved in Zimbabwe and elsewhere but I think Leo lithium stock price rise and

and Atlantic has not risen but I think that's kind of like not well understood Brazil is another good spot you mean um area with Sigma and there's a few other companies like Latin resources and lithium ionic and Atlas which have kind of you know appeared so I just think like we're very focused on Hard Rock more than others we think we like E3 lithium you know as a dle play or relatively undervalued dle play but um deal is still harder um South American Brian's still harder right political risk is

you know um it makes those countries companies have um you know trade at lower valuations right so we're focused on X China supply for X China demand then you know ideally you'd like to find the companies that could get you know premium pricing for their product but also premium valuations and we think hard rock and good jurisdictions is the way to go so um all those regions that I mentioned and then let's not forget Australia there's companies like Global lithium um Rodney put together a chart there's

only 14 compliant resources in Australia vast majority of them all already integrated with Majors right or or they or you know Albemarle and Min res um or sqm west Farmers uh you know so there's not a lot of available spot Jimmy and Supply so a company like Global lithium that has all of its off take you know available um they're with their two assets I think they're close to 50 million so that's always going to be a good jurisdiction and you know their exploration company there's a lot of Australians in Canada

the reason they're coming to Canada is because they think it's under explored and undervalued and in part you know Western Australia may be more competitive or maybe some of the assets have already been found uh but I think there's more to be found in Western Australia but um yeah so those are those are all the regions like so hard rock matters these are the regions um I won't rule out Deale there's some interesting stories like we'll see the Salton Sea but there's just that like

that story has has been hyped at show me time um and uh you know A lot's kind of come back to you know just conventional plain vanilla we've been talking about it for a long time keep it simple stupid keep it spottering stupid you know um so for the investor audience that might be listening to us today how would you suggest an investor to cut through the noise when looking at a company developing a leaking project what do you consider to be red flags in the current market look there's a lot like

um to one that you want to cut through the noise you know watch Rockstar Channel and read investing News Network and everything that Priscilla Barrera writes and interviews so that's one area um the The RK Equity lithium scoreboard has grown to over a hundred companies um and every month I found a bunch here they're just people that like listen to my presentation I hadn't heard of they said oh you know could you put me on the scoreboard and I'm a 50 million market cap with some exploration properties and you know

in in Canada I'm like Oh my how many more of these like are there so while we are in a structural shortage for lithium as far as the eye can see there is definitely an oversupply of lithium investment opportunities so um you have to be careful you can't just like look at the scoreboard and throw darts and everything is going to go up there's going to be things that are are flyby nights right or you know so you always look at the cash that a company has look at um do that marketing materials seem

you know real or they look very like over promotional right so there's a lot of again you have to be reasonably um I don't know there's lots of Greater fools out there and so do whatever specific red flags I mean you can get like pretty technical or companies that just say oh we're close to XYZ company or you know here I'm this tiny company and I'm comparing myself to Albemarle right those are like over promotional kind of tactics or if just if just something doesn't smell right in the way

that they're presenting themselves um be careful or if you've never really heard of the company and like what's the source of the company being introduced to you right like so you know oh I heard about this on social media because XYZ person did like just follow there have been people who have been following the space like a long time including myself and Rodney but others who if you're a retail investor that you know go on Twitter uh go on LinkedIn you know find people who are intelligent they're not

afraid to kind of like show who they are um and and listen to what they're saying and what what are they um you know and and if and if these credible people are not talking about a company that is coming to your attention that could be a red flag right so like you ask why why is nobody else talking about like why you know so those are those things I suggest yesterday we heard lithium producers mentioned how legislation such as the U.S inflation reduction Act and the EU critical minerals act have been positive

for the industry do you agree and what do you think is still needed from governments when it comes to supporting this build out of resilient Supply chains the inflation reduction act and Joe manchin you know cutting a deal after Holding Out for a long time in August of last year it has an absolute Game Changer um I said it as soon as Biden was elected we published a video and and and an article like the sleeping giant awakes and then I've been talking about like you know the big money Biden and you

know I call it the battery Metals inflation act okay because they've just put it's not just subsidies um you know for consumers it's tax credits for producers and it's local content requirements that in order to get the subsidies you have to produce them in America or with Free Trade Agreement countries so it is America has joined the battery arms race uh in a very substantial way it's not still fully white it's happening if you look at I mean Albemarle had some lied which

showed how much new investment has been announced and is being plugged as a result of that it's very very meaningful so Europe's slower right Europe talks a lot right you know but Europe is also an amalgamation of 27 countries so the EU can't just force each individual country to change their domestic legislation so it's happening it's happening slower they're a little bit up in arms because oh my God American now is it's saying field because the the supports have been

too generous that's a bit ridiculous because the EU has always been talking about you know they've been berating America for not so I think you'll see companies like European Metals Holdings um have been labeled strategic by the EU so that's a hard rock deposit in the Czech Republic that's partnered with the Czech government I think it's highly likely that that gets permitted you know into production I think it's very undervalued and underappreciated but I think burned you know by Pride wolf kind

of um mentality in Europe just like show me the money it's it's Jerry Maguire show me the money time um but what more could be done is just further legislation in Europe and then permitting reform and like just push back on you know nimbyism and other um it's just very difficult even the department of energy loan programs office they'll Finance everything other than mining they'll do the processing so if you take they'll actually Finance concentrating spajamine like one percent spodium to

six percent they'll finance that but they won't Finance the digging of the ground to get the one percent and that's not this huge cost element to it but it but it does it still demonstrates a bias against mining so if you had the bully pulpit if you had like Biden you know with a hard hat in front of a mine site you know instead of just solar panels digging shovels we need to support mining then it would be pushed back again you know then there would be permitting reform so that needs to speed

up will it I don't know we're gonna have an election year but uh so when you say what more needs to be done just permitting reform all right my last question for you today would you be able to share any key lessons maybe that you've learned this past year when it comes to investing in lithium or any other final thoughts you want to leave our investor audience with today you interviewed me in 2019 and I um I coined the term velocitility right so this industry as UPS Downs you know but all the dips

with good quality companies good management buy the dips and you'll you will experience Higher Love uh to quote Steve Winwood um so if something like try not to buy things you know at their all-time highs okay but if you own them and you didn't sell them um when they were near those all-time highs just um just have patience I mean long term I mean like good companies if it's album all it's live and right they have a certain risk profile to them if you've been burned by you know if you bought a

dle speculation at the top right because you missed it then like I don't know what to tell you about those lessons just like don't chase the next you know hottest thing when it's kind of like at the top of the market but um there's a lot of new exploration stories um so if you could find a 10 million 25 million market cap company like lithium Americas was 14 years ago and we started working or Piedmont lithium seven years ago when we started working with them or win some resources when we started

working with them 18 months ago we've represented these three companies and many others from very early stages they've made discoveries they're good quality companies you know there's a little bit of luck to them but um a lesson uh to any retail investors like looking out there is just be careful who you trust and try to find good people who have proven track records high integrity who disclose we disclose everything right like in our newsletter you know who we represent and we eat our own cooking right so when

we're talking about a company we're typically invested in it right we might be advising the company you're never going to hear from us like a company like us promoting a company that they're not already invested in and I think you should ask that of like anybody gotta wonder if someone's touting something like what's their interest we disclose it at uh so I just continue like I do believe we will have higher love going from Q4 to one of next year um borrowing some macroeconomic Shock that we can't you

know forecast you know the supply demand is strong lithium prices are going to be higher and commodity equities follow commodity prices so the the the stock prices have fallen in part because of the lithium price the spot lithium price fell and that's important like for Equity Market sentiment it's not really important it's not what the incumbent producers are necessarily selling for but it's a sentiment indicator for sure so follow yeah that's a key lesson just follow the lithium carbonate spot price

and to get some sense of you know where sentiment is going to be thanks so much for joining me today Howard Priscilla thank you as always for interviewing me [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]