Facts

Lithium carbonate prices in China were at 468,500 = USD70.239 yuan/ton in late May, not far from February lows amid stronger supply projections while strict lockdowns in Shanghai eased the metal’s surging demand. Beijing called for an increase in output from smelters and miners to relieve the rally that saw prices reach record-highs in March. Fresh figures showed that lithium carbonate production in China rose by 2% on the month and 30% on the year during April, while supply is projected to further increase in May as Covid lockdowns are expected to recede and capacity is set to rebound for manufacturers. Lower activity due to the lockdowns also dented demand, as sales of new energy passenger vehicles plummeted 40% on the month in China, with Tesla purchases falling the most. Still, carbonate prices remain 65% higher year-to-date on the back of a global effort to reduce carbon emissions, while gasoline prices remain in recent highs.

Can't see Lac falling.

Lithium demand hasn't fallen, but it hasn't risen to an expected level either, and probably won't as long as there's chip shortages, Covid etc. The chip shortage will be solved, and electrification is here to be a huge part of the green transition. If you don't believe in a huge need for batteries for the EV industry over the next several years, you're wrong. The supply of Lithium will increase in China, where production is quicker to be set up without looking at environmental problems, but they will not be able to meet the need that will come.

Where will the price lie? We don't know, but from 2017 to 2022, the lowest Yuan is 39,000 and the highest is 500,000.

We are now at yuan 468,500 = USD70,000, is that a problem? No for all the calculations and budgets for Lac are drawn up on a much lower basis. Most calculations in 2022 say that at a Lithium price at about USD30,000, EBIT will be approximately USD15,000. This, of course, can fluctuate by type of company it is and how efficiently it is produced. The conclusion is to don't panic, the buisness case is more than intact for Lac, my calculation says in the production of 30,000 tons of Lithium, a fair SP will be between USD 75-100.

If you want to compare Lac's options for the future, there is a lot to pick up on SQM web, as they are in full production with approx. 140,000 tons of Lithium for 2022. They forecast that there may be weaker market in Q2, but that market is back in Q3/4, over the year increase 30%. China is about to turn from a response production that is being pumped lots of cash into the market to get back from the covid lockdown.

I still don't sell a single stock because we're not at a fair level at all, and we're only going to see increasing demand for Lithium over the next several years. Those who sell now are going to buy back at a much higher level, otherwise you just have to sell and take the profit.