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Lithium - The biggest opportunity for investors for the next few decades?

Geoffrey Wells
27. 4. 2023
4 min read

Today will be a quieter post, where I won't go directly into Tesla, but will generally elaborate on my thought process on EVs. Since it looks like the EV craze will be around for a while, I'd like to talk to you about another issue or maybe even opportunity. By opportunity, I mean Lithium, as a scarce commodity, a rising cost raw material, hard to obtain and most importantly with not many sources to meet future demand.

The electric revolution in the automotive industry is still doomed in my opinion, nothing will change that. A large-scale transition from internal combustion engines to electric cars powered by lithium-ion batteries is, in my opinion, impossible, because it would require huge and unsustainable quantities of lithium, which, in a way, could be an opportunity for the companies that are mining it.

Why is Lithium an opportunity for investors?

Current lithium deposits are limited and lithium mining is difficult and polluting. If all today's cars were replaced by electric cars, we would need tens of millions of tonnes of lithium, far more than the world's total production and supply of lithium combined. And that's counting lithium for new cars, not for replacing older EVs with new ones.

Someone can write to me here: recycling is the solution.

My answer is no and no again, it is not.

Recycling lithium from batteries cannot solve the problem. Even in optimistic scenarios, it can only meet 10-30% of demand at best, and with recycling, about 50% of the lithium can be recovered. In reality, however, most lithium ends up in landfills. Moreover, recycling lithium is neither cheap nor environmentally friendly, the problem here is more the environmental part - we want to see a clean world, no pollution, right? That's why EV.

Another common answer is that they are already working on battery types with less or no lithium requirement.

Does he have an answer? Good scifi.

There are no other battery types in sight to replace lithium. Sodium, aluminum, or other batteries are in their infancy and will not offer the energy and range needed by EVs anytime soon.

So electric cars will end up being a fringe solution until a new miracle battery type is discovered or until world lithium production increases dramatically, which is probably not imminent. The electric car revolution has hit a hard lithium wall that will be very difficult to overcome. It is time to look for alternative solutions that do not plunge us into total dependence on a scarce raw material.

But as I write in the introduction, what is a problem for one person may be an opportunity for another. EVs are likely to be around for the next dozen years, no question about it, but I don't want to invest there when I can focus on the scarce raw material - lithium.

Do you know of any companies that are mining it? I'd like to know some of your tips.

UBS Porsche forecasts that global demand for lithium will be 17 times the 2017 level by 2025. By 2030, it will be twenty-eight times higher. This represents an annual increase in demand of 20-30%. That could be a solid opportunity, plus you don't have to shoot from the hip here to see who will end up being the major EV producer - you have a better chance of success and solid growth if you ride what every single one of them needs.

Another prediction: Benchmark Mineral Intelligence estimates that total lithium demand will grow from around 300,000 tonnes today to 2-4 million tonnes as early as 2030. And further to 9-18 million tonnes in 2050.

In addition, we must take into account that lithium is not only needed for batteries, it has much wider applications in other sectors, which will put further pressure on the price. Where specifically? Electronics, glass, air conditioning, aluminium production, medical, nuclear, metallurgy and others.

Lithium thus has a very promising future in my opinion.

Opinions? What about @mich_s for example, you might have an overview of the companies.

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