Tuesday, September 06, 2011

Lithium Investments: Patient investors could reap big rewards from Lithium - Chris Berry ilc.v, tnr.v, czx.v, rm.v, lmr.v, abn.v, asm.v, btt.v, bva.v, bvg.v, epz.v, fst.v, gbn.v, hao.v, jnn.v, ks.v, ktn.v, kxm.v, mgn, mxr.v, rvm.to, svb, ura.v, nup.ax, srz.ax, usa.ax

"Lithium Jolt: DBM Energy: This Breakthrough Will Soon Slash EV Prices Drastically.  Electric Cars' roll out in a mass market fashion used to be at the mercy of Oil prices, government incentives and consumer devotion to pay the top buck for being Green. This situation can be changing right now by start up from Germany and its wonder Lithium battery.
News about DBM Energy and its technological break through in Lithium batteries technology made its way, finally, into the sale pitches of stock promoters. We do not endorse the company mentioned in that report in any way - you know what we like here on this blog already - but this article is an important indication that this technology news are filtering through.

If the previous claims about the cost of this KOLIBRI Lithium Batteries will be confirmed we have a real breakthrough in Lithium batteries technology which will make Electric Cars reality in a very short period of time. In this case German government and company is very right to hold this technology so close to the chest and it explains that we have only scarce information in the North America. Lithium Rush will be next with the new headlines with DBM Energy hitting the wires."


While lithium equities might not set pulses racing in the short term, House Mountain Partners founder Chris Berry makes his case that over the longer term the element will be in very strong demand. 

An Energy Report Interview

Author: George Mack
Posted: Friday , 02 Sep 2011

The Energy Report: I'm looking at an unweighted basket of lithium stocks and it's down about 17% since July 22. During the past six months, these stocks have underperformed the S&P 500 by about 30%. Chris, what does this tell you? Is it heralding a slowdown in manufacturing and the economy in general? Or, are lithium equities a screaming buy here?

Chris Berry: I think it tells us both. If you look at recent gross domestic product (GDP) data in the United States or, most recently in Germany, many Western economies are in stall speed with second quarter GDP numbers barely coming in above zero. So, the world economy is at a little bit of a crossroads-the West is slowing down and relying on the East as the sole engine of economic growth. There is a risk of a double-dip recession here in the United States, but I think it remains to be seen if that will happen. Regarding whether lithium equities are a "screaming buy," I think there are some lithium stocks that are undervalued at their current levels, but it's not safe to assume that all lithium stocks are a buy right now.

There are two reasons you've seen lithium equities get pushed down in the last couple of months. The first has to do directly with uncertainty in Western economies. Second is the fact that there are likely too many junior exploration companies in the lithium space based on current and near-term supply and demand. So based on these two factors, everyone is just getting pounded. It's a flight to quality, and it's a reaction of fear in terms of where to put your money, which is why you've seen gold hit historic highs. Lithium, itself, is an industrial metal, whether or not it's used for polishing glass, as a grease, or its most popular current-day use-in batteries. The long-term potential of lithium rests with growth and innovation in the automotive industry. Electric vehicles are a key growth driver for lithium demand in the future. So electrification in the automotive industry, energy storage and consumer electronics demand are all themes to focus on when developing an opinion on long-term lithium demand. There is a great deal of debate in scientific circles regarding what the optimal battery chemistry is or will be. Lithium will play a central role here, but there are other choices, as well, clouding the end game.

TER: Will some look back at this as a missed opportunity in lithium equities?

CB: I think so as long as you are selective. One of the main themes that we look at in our research at House Mountain is how GDP growth is directly related to access to cheap and reliable energy. How that energy is generated is a question with a number of different answers. If you think about the potential that lithium has in terms of energy storage and generation, it will no doubt play a role in the world's future energy mix. Hydrocarbons will always be with us thanks to their availability and energy density, but lithium will, in my opinion, play a central role in transportation. This isn't something that is going to all shake itself out next week or next year. We are looking at a process that is slowly evolving.

TER: Right now, given the current economic environment, what is the bull case for lithium?

CB: I'm not sure the bull case is particularly compelling, again, because you're looking at a predominantly industrial mineral facing a slowing global economy; granted some economies are expanding faster than others. I think the lithium industry draws an interesting parallel with the rare earth industry. You are at the beginning stages of a huge shake out in the rare earth space where many of the junior explorers there won't achieve production as the small size of the market cannot support the 200-plus companies involved in rare earth exploration. With lithium, you've got four primary global producers and a couple near-term producers in a market that today has too many participants given the current global lithium demand picture.

But I do think over the coming years as this emerging growth phenomenon in countries like China, Brazil and India continues and other economies recover, the case for lithium is strong. Lithium can play a huge role, whether or not it's in electricity generation, electricity storage, or the transportation sector. I don't want to underestimate how critical a viable transportation sector is to any economy. If you think about supply chains and what they mean to a given economy in terms of the movement of raw materials, the transportation sector is absolutely critical to maintaining or sustaining any increased quality of life.

TER: I know you travel to Latin America at times. Exports from Chile and Argentina are up over last year, and the lithium industry looks very positive down there. What's going on in South America? Is this a resource issue, a policy issue or both?

CB: I think it's a mixture of both. When you talk about Chile and Argentina, they are two of the top lithium producers and exporters in the world. Most, if not all, of the producers are brines and they are solidly economic. You have healthy demand for lithium and lithium carbonate coming from Asia so that's, in my opinion at least, why you are seeing these export numbers increase from Chile and Argentina. Both of these countries have mining as a central driver of their economic growth. Various provinces in both countries have been mining metals-lithium, gold, copper, you name it-for hundreds of years. They also understand how important mining is to local economies. I know, for example, in some provinces in Argentina, the mining industry accounts for up to 70% of the local economy. So it's an overwhelming engine of growth. That's not lost on local and national politicians in these countries. These countries are stable geopolitical jurisdictions with a set rule of law and very clear royalty schemes. That is what attracts foreign direct investment and creates jobs.

TER: I don't know if you go to Australia, but it's friendly to mining as well, isn't it?

CB: Australia is an extremely mining friendly country. What is interesting there, however, is that the last few heads of state have tried to push ahead with a carbon tax. It's no surprise that the proposed higher taxes have been viewed unfavorably by large producers with operations there. It remains to be seen what will come of this legislation, but it is really one of the only potential stumbling blocks I see in an otherwise solid mining jurisdiction.

TER: Thank you very much, Chris. It has been a pleasure.

CB: I think a lot of what you guys do at Streetwise. Thank you.

With a lifelong interest in geopolitics and the financial issues that emerge from these relationships, Chris Berry founded House Mountain Partners in 2010. House Mountain firmly believes that the emerging quality-of-life cycle emanating from Asia is a "game-changer" that will affect everyone throughout the world for decades. With that in mind, the firm focuses on the intersection of three topics: 1) The evolving geopolitical relationship between emerging and developed economies; 2) The commodity space; and 3) Junior mining and resource stocks are positioned to benefit from this phenomenon. Chris spent 14 years working across various roles in sales and brokerage on Wall Street before founding House Mountain Partners. He holds an MBA in finance with an international focus from Fordham University and a BA in international studies from the Virginia Military Institute. Chris is also a member of the Canadian American Business Council. He invites readers to receive a complimentary subscription to Morning Notes, which provides analyses of emerging geopolitical, technological and economic trends. Go to www.discoveryinvesting.com.
This article is an amended version of one published by The Energy Report - www.theenergyreport.com."
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