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Lithium Comment - March 2022

It is no accident that that the EV automotive giant Tesla has signed agreements with ASX listed Liontown Resources (LTR) and Core Lithium (CXO) to secure lithium supply from Australia. These are both hard rock spodumene projects, which is a low risk relatively safe bet to guarantee product.

This contrasts with GM and VW which have both signed deals with emerging producers experimenting with novel extraction techniques, whose projects carry more technical risk, with potential for delays or production shortfalls.

We’ll see who wins this strategic bet, but there is no doubting the strength in lithium prices, which is gathering momentum as the take-up of EVs gathers pace.

LITHIUM PRICE ACTION LEADS TO EXPLOSIVE 2021

From mid 2018 to the start of 2021 lithium’s price slumped due to China’s reduction in subsidies to its battery manufacturers; lithium projects were cut back en masse.

These cutbacks set the stage for a price explosion in 2021. In the past 12 months Lithium Carbonate (LCE) has climbed 402%, while Lithium Hydroxide has risen 297%.

We have covered Orocobre for some time, now renamed Allkem (AKE) which operates the Olaroz lithium brine project in Argentina. The lithium producer LCE prices for the current six months to 31 June 2022 of US$25,000 a tonne (Free On Board), an increase of 125% over the prior six months to 31 December and up 25% from previous guidance.

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