Fears about a lithium over-supply are over-stated, says expert
Market demand for lithium will outstrip concerns of over-supply says Tim Weir, Executive Director of Precision Funds Management and a 20-year veteran in investment and capital markets.
The lithium trend has been strong for some time, how far can it go?
We are seeing now a pull-back in the market for lithium stocks with investors keen to get a bit more exposure in the quality end of town.
At the end of the day, I think it is definitely a thematic that is here to stay in regard to electric vehicles.
There is speculation of a lithium oversupply but I don’t think the market has understood the full market demand.
Recently the Chinese reduced subsidies for electric vehicles by up to 40 per cent and that really spooked investors, but if you look to the long term, those same subsidies have been increased.
They are much more bullish on the long-term outlook so investors need to be patient.
Do you think other battery metals will overtake the importance of lithium?
There will be crazy, out-there tech that will evolve and different metals will be triggered by that but I still think it will be the traditional Electric Vehicle metals that will form a great part in that technology.
Where to next for battery metals?
The next wave will be in battery storage – we’ve been through the cobalt, lithium and graphite and associated metals but we need to have somewhere to keep it.
I think the next trend we will see is the continuation of the refinement of the technology itself to make these batteries go better for longer.
When it comes to ASX exposure in that end, there are few in the battery storage space, with the majority of movements driven by the biggest car manufacturers.
But I think the tech boom in that area will be the next one to make a run.
How will innovation in the energy storage industry impact the market?
While innovations in battery storage will not change the market entirely, there will be demand factors dependent on what each technology requires.
Innovations within the sector are ultimately the ones that make the biggest difference.
While Australia is still viewed as a safe and optimal place to do business, the truth of the matter is that opportunities are becoming exhausted.
Those projects that we are focusing on are those that were once marginal with lower grades or requiring deeper drilling.
The best projects have been taken and we are now looking down the food chain.
In contrast, parts of Africa still have high grade, shallow deposits that have not been touched previously because of geopolitical risk.
We have seen the advent of companies like HiSeis that use technology to provide underground seismic services for hardrock exploration, providing accuracy at a greater depth.
Tim Weir is Executive Director of Precision Funds Management. Tim has 20 years of experience in investment and capital markets. He began his stockbroking career with Porter Western in 1993 and served as a partner of the business until it was acquired by Macquarie Bank in 1999. In August 2016 Tim and colleague Tony Kenny launched Precision Funds Management and successfully raised just under $25m.
Precision Opportunities Fund (POF) is a specialist investment manager with a focus on identifying opportunities and undervalued companies listed on the ASX. POF’s principals have significant diversified investment experience in the small and mid-cap sectors of the ASX, both from an investment and operational standpoint. Tim is also on the Board of newly established Corporate Advisory Firm Chieftain Securities.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.