How to Ride the Lithium Battery Boom: JGL Partners’ Jonathan Lee

The Energy Report: Jonathan, what is the condition of the lithium space today?

Jonathan Lee: The lithium space today is an oligopoly; there are only four major mines owned by four companies. Over the past three years, the space has actually consolidated with the largest mine, Greenbushes, owned by two companies through a joint venture agreement. From that perspective, price increases have occurred over the past three years, just because of the concentration of the mine operators.

TER: What are the greatest challenges for the space?

JL: The hardest challenge is that lithium is not really a mining sector investment; it’s a specialty chemicals investment. A lot of the products that lithium miners or producers sell are specialty chemicals, and there is somewhat of a competitive moat around these products because many are specialized to the customer. Lithium is not a commoditized product. The incumbents have both the premier assets globally in terms of low-cost operation, and also a knowledge base of who the customers are, what they’re looking for and what specifications they require. Those are some of the challenges faced by any new entrant to the space. From the investor perspective, there are limited opportunities for pure play lithium exposure since three of the four existing producers are part of larger conglomerates with other business lines, Sichuan Tianqi Lithium Industries Ltd. (002466:SHE) being the exception.

TER: What are the greatest opportunities here?

JL: While the premier assets are taken or being almost fully utilized, demand is outstripping supply. The compound annual growth rate (CAGR) for demand is over 10%, while the supply expansion from Chile is limited in the near term because of permitting and lifetime production quotas. Another factor limiting supply is the fact that FMC Lithium Corp. (FMC:NYSE) continues to have technical problems expanding its production in Argentina. …read more

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