Guest post:
Ganfeng & The Lithium Industry Reshuffle: TNR Gold Plugged Into The Tesla Energy rEVolution With Lithium And Copper Royalties.
There's been two great developments for us at TNR Gold lately.
The first was BP’s instrumental report highlighting peak oil potentially being behind us and Looney’s desire to have his giant invest 10x more in renewables. With EV’s picking up the title of New Normal, the times are already good for lithium. Even better is national grids considering renewables the New Normal as well.
We start to see lithium blessed by a confluence of not only extreme demand from the rapid electrification of mobility systems but also demand out of responsibility towards providing stability to otherwise volatile renewable energy systems (especially Wind & Solar). The latter development will provide lithium demand on a different magnitude to EV’s.
The real business for lithium & Tesla is utilities - by now you can recite my justifications by rote, so here’s a circumstantial update:
Earlier in the year, Tesla gained energy license and integrated with German utilities, now it has done the same in the UK. A quote from Musk on the matter below.
Talk is good, especially when it’s made by BP and Tesla, but money’s better. Here comes Ganfeng then with the real money while the West jibber-jabbers about needed stimulus and forecasted mass infrastructure investment (we will jibber-jabber ourselves on this point at a later date).
We see Gangfeng lease three more plants to become the largest global lithium hydroxide producer. Looking at Ganfeng’s Interim Report 2020, this move is exactly the type of discipline in opportunism we regard so highly when it comes to Chinese companies and their lithium plays. The move grants Ganfeng 65% of total Chinese chemical conversion capacity, boosting it up to top place in world rankings for chemical conversion.
Suddenly, Ganfeng’s earlier plays fall into place as well, as increased chemical conversion calls for more raw material input. So we read on and see Ganfeng moving forward with its Mariana Lithium project, including finally designing plant construction on a project that had been laying patiently out of the spotlight before it’s resource estimates suddenly "increased by more than 250%".
Those few sages of our industry are aware that Lithium leaves only the most patient & opportunistic companies to survive until the always prophesied electrics switch. In 2009, TNR Gold saw that companies needed not only the passive resilience to survive lithium market properties, but also the active confidence to pursue opportunities that would pay off a strategic edge many years later from the decision. Our royalties were chosen per that thinking.
We believe the same play is in copper. While few non-Mandarin speaking entities possess the required confidence in lithium, the West is much more open to the idea of a traditional metal like copper. Our chosen positions of participation, again, reflect that.
The lesson that needs to be learned, for those missing out, is to see the market for an opportunity to gain an advantage before the metal sees the respect it deserves. This respect will come from the favourable congruence of industry disruption, as we already see with the electrification of not only mobility systems but utilities as well.
A bet on lithium & copper is a bet spread between Tesla’s and FAA(N)G’s integration of grassroots EV storage potential and a more immediate solution of installing macro battery storage to account for renewable shortfalls in reliability.
You can find more information about TNR Gold and our rEVolution Royalty Holdings portfolio on this blog. And below are my previous articles providing more in-depth observations for this Energy Transition and its dependence on the critical commodities.
The rEVolution Feeding Frenzy and the Shadow Beneath: Lithium-Ion Batteries and the Next Leap Forward.
Daimler, The End Of The Internal Combustion Engine And The Curious Case Of Plug-In Hybrids.
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