Episode 230: Lithium Update

Hi, it's Joe Lowry. Welcome to another episode of the Global Lithium Podcast. Today is episode 230. It is a solo episode. It will be short 20 minutes or so. I just want to provide a catch up on some of the things that have been happening in the last couple of weeks, including my trip to the Bank of Montreal event in Florida. And my visit to Nevada last week to see the LAC team in both Reno, Winamucca, and the construction at Factor Pass. I'll also have some comments on a couple of the earnings reports. I won't dwell on that too much. I think it's germane to demonstrating that we have fully turned and the market is in a full upswing mode. Which is certainly not to say that we aren't in for volatility in the next year. So maybe longer. We've seen the GFEX the last couple of days. I'm recording this on March 4th. I guess the last three days. It hasn't looked good, but I'm not sure how much of that has to do with the US operation in Iran called Epic Fury. And I only mentioned the GFEX because that clearly dominates the psychology right now in China, which is by far the largest source of lithium demand. But price is already much higher than most anticipated it being this early in the year, at least as indicated by the GFEX and China's spot price. Getting into some specifics now at the Bank of Montreal event. Unlike the past couple of years when I attended my request for meetings on their app for the event, went nuts every time slot that I allocated for meetings was pretty much immediately filled or very quickly filled. I met with everybody from Japanese trading companies to large investment houses. Two smaller companies looking to get into production. One of my meetings was an ex-testile employee who has a different company now that he's started. But he was one of the prime movers behind the Corpus Christi Converter. I took the opportunity to ask him about that. He was very positive. So I am hoping that Corpus Christi by the end of the year has proven itself. It would be nice to see a successful conversion project outside of China. I don't have enough insight into what's happening in Corpus Christi to make a call either way. That's why I asked somebody who was in a position to know. I consider that a green shoot. Hopefully we see results. Almost every meeting I had had two central questions. The first was what were my thoughts on price, how I would go, how long would it last, the typical discussion on price. I thought it was interesting though that I think more people find a long term robust price of possibility now. Certainly last year there was so much pessimism. It was really hard to have conversations about it. Now with what's happened in the past several months. All the talk about the second topic, which was battery energy storage systems, how big was that going to be? Was it the tipping point that put us into a shortage situation, etc. etc. I just found it really interesting that the same dialogue happened in just about every meeting I had or certainly a similar pattern. I didn't get to see many of the lithium presentations because of my meeting schedule. I did get to hear Tony O'Taviano talk about Lyentown. Of course he's very positive as you would expect. I am a supporter of Lyentown and I hope to see them go from strength to strength in line with the improved market. I didn't talk to Tony for very long. I also got a chance to talk briefly with Tim Coiter. I like those two guys and I'm hoping to be back out of Kathleen Valley when I am in WA later in the year. Probably my favorite moment of my time at BMO was getting a chance to have dinner with Dale Henderson and some of the leadership team from PLS. I am, as I've made clear many times on the podcast, a shareholder of PLS and a fan of the operation and I have had a relationship with them that goes back to meeting Neil Biddle in 2015. So I wish them the best of success. I know there were some people that were critical of them doing the restart of Nungaju. I thought it was really well-timed in that the schedule they have isn't going to affect chemical production much at all in 2026 and between the timing of the start, how long that will take, the length of the supply chain and then having to get into chemical conversion. Those LCEs are really a 2027 story in my mind although obviously PLS will benefit in 2026. During the week I also got some information from China which this is directly from a person who works for one of the larger lithium producers in China and I'll just give you a hint it's not Gangphen and it's really about the outsized impact that GFEX is now having on the psychology of the market in China. I think that's pretty well understood now but the way it's being used by CATL and others to continue efforts to manage price. Most people have internalized that now and I would say it's time goes on the GFEX will be one of the major tools but it won't be the only tool as we go forward the next few years for the time I'm continuing to be involved in the industry. China is going to be the major demand game in town but demand is also growing elsewhere and China's dependency on lithium feedstock and lithium chemicals from outside their access of control which I view as being inside China and Africa. Major lithium producers that are not Chinese companies will likely see contracts and pricing mechanisms continue to evolve and I wasn't going to get into the quarterlies this early in the podcast but if you look at a company like SQM and their fourth quarter results which were just recently announced their price increased each of the last two quarters which I said last year was one of my key indicators as proof that the market had turned as I believe that SQM remains the best bell weather even though they're pricing with the sulfate tolling in China and their activity in Western Australia their reported LCE price isn't quite as good an indicator as it used to be but I think it's still the best one out there of what the global market is really doing price wise and if you look at their latest earnings presentation you see that price bottom in the second quarter of 2025 in around $8.50 and then rose to $8.8 the next quarter and then the fourth quarter was around $10 and they were very clear on the earnings call that they expect a substantially higher price in Q1 of 2026 which as we both know is more than two thirds over at this point and I would guess the percentage growth of the percentage increase of that price in Q1 is much higher than it was between Q3 and Q4 I will also stop calling Abel Marl the world's largest lithium producer as I think SQM between what they do in the out of common with carbonate hydroxide in the sulfate, the China that gets told, and their activity in western Australia I would now give SQM the mantle of the world's top lithium producer, but that is the global lithium unofficial designation. I think over time we will see that SQM is just a much better operator and that I like the activity they have in China because it's it's additive, but it's not dominant in their portfolio. I don't really believe that SQM is beholden to the influence of the government of China in any fashion, like Abel Marl is just because so much of their asset base is in the middle kingdom. This episode is also brought to you by MLC. Are you looking for the highest purity calcium products to produce battery grade chemicals? Look no further. MLC is your reliable partner. Check out line4lithium.com for more information about MLC's calcium solutions and expert support. That's LIME the number four LITHIM.com. I continue to find Abel Marl's lack of clarity on the market, almost shocking, as the company with the largest portfolio of lithium products across the space and I would say the largest marketing and sales organization. I really would expect them to have much greater insight than they seem to have. I know how hard it is to predict this market. I'm not just throwing stones at Abel Marl, but I think if you look at just some independence out there and I'd point to Daniel, who meant as is one of them and I probably include myself in that number as well, I think historically we have done a much better job of predicting the market. The range they put on 2026 of growth between 15 and 40%. Especially after the years already started when they say that, they know what their contracts are. They should have insight into the market that allows them to put a much narrower frame on growth. To that point, they framed ESS growth in 2026 as between 25 and 60% even a wider window. Maybe because it's ESS and there's more uncertainty than perhaps there are in EVs. A broader growth number is reasonable. I just think that when you're in a position to know the market as well as Abel Marl should be that range shouldn't be 25 to 60% it should be significantly more narrow than that. Otherwise, I'm not going to say too much more about the earnings calls. I always find SQMs short and sweet calls the most interesting and just because their style is unwavering, they don't say a lot by design. But I would say although Abel Marl's calls are almost always much longer than SQMs, they don't give a lot of quality information out either. So SQM just makes it more efficient to listen to their calls. If you're not going to hear significant details that might as well be short. Zalanda's offers technology and services that support both direct lithium extraction and conventional evaporation ponds. Minimize the environmental impact of your lithium site through Zalanda's data driven insights and tailored solutions for each extraction method. Go to Zalanda's.com for more information that's zel-and-easy.com. I've visited Reno and Lacks Technical Center last Thursday and then I was at Thacker Pass on Friday. I took the opportunity when it was offered to stay in what they call their Workforce Hub. It is a huge facility where almost 2,000 people can stay as the construction ramps. The site of Thacker Pass is the much more amenable to construction and development than a lot of the places I've been elsewhere in the world, whether it's the Puna of Argentina or many places in China or Western Australia. Northern Nevada is a rural population but it has great logistics. Winamaka, where the project is run out of in terms of the day-to-day activity, is a relatively small city in Northern Nevada and what Lack has done is built this massive housing facility that will house and feed as I mentioned before the 2,000-ish workers that will be there. It's really a first-class place. I have stayed in a lot of hotels around the world that weren't as nice as this facility and I think the city of Winamaka is overall very pleased with how Lithium America is handled bringing people in in a significant number especially relative to the population of the city. There are always going to be a few nimbi people in any situation where a small town has a huge project operating nearby but I think that it too Lithium America's credit they have done an excellent job in the conversations that I had in that regard and I know a lot of people that listen to this podcast have experience in mining and it's always good to take excellent care of the people that are building your project and speaking of that one of the things that has always been an issue in the Lithium industry has been project execution. Lithium companies over the years weren't building new plants that often and that's one of the reasons why China has shined so much in the last decade or two is their project execution but they also play by very different rules with respect to safety and some of the other issues in terms of how they take care of their employees and what I have seen in the western world is that the struggle has usually been whether we go back to Winamaka and Lerto was built or some of the other more recent projects in South America very often the construction was run by someone that was brought in that was literally being paid to learn how the job is far as this type of project execution. Bechtel is one of the world's largest construction and engineering companies. Their legacy was helped in the early 1930s with their involvement in building the Hoover Dam which was very large construction project in the southwestern United States. You can google that but Bechtel was one of the six companies involved back then and you're talking almost a hundred years ago and when you want something built right you get a company that has done it many many many times and FACRA passes often been criticized for the capital number and as time goes on their capital number looks a lot more reasonable compared to some of the numbers you're hearing for DLE projects and other major projects and that's that's one of the things I think you also need to consider when you look at the emerging lithium world is that the Chinese can build cheaply in China probably build cheaply in Africa as well for a lot of reasons and much of that is the ability to not do what a company like lithium america is doing with respect to employee welfare health and safety etc. But when the Chinese go outside of China, China cost and China speed tend to gravitate to the Western mean. I don't think when you look at the capital numbers of lithium projects in Argentina and even elsewhere in the world that Chinese companies are involved in, their cost advantage evaporates pretty quickly. And I will get off my soapbox there for a second and get back to what I saw in Nevada. I would say LAC has assembled a great team and when you combine that with Vectals experience, this project is destined to be a success. The other piece of this is the fact that the mining is quite simple. They have a contract miner that has about a century of experience in doing this kind of mining. This is a shallow open pit with an average depth of 300 feet and it will be reclaimed actively throughout the life of the project. This was my fourth visit to the site. I am more impressed every time I go and I know I risk at some point sounding like a cheerleader for lithium americas. I am giving that as I wind my career down I really want to see both fact or pass in the various projects in the smack over, be successful and return america to lithium credibility. I mentioned it several times on the podcast like Pilbera or PLS now. I am a long-term LAC shareholder. Actually I've held LAC for longer than I have PLS. What I would recommend to people is that they watch the next couple of years closely. I think LAC will validate the fact that sedimentary assets are viable and will be a major part of North American production. Admittedly in 2026 that is a very low bar given the fact that silver peak is the main game in town. For the United States we produce less than 1% of the world's lithium. That will change markedly over the next decade. In my opinion I know many take the opposite tact not believing in sedimentary and not believing in daily in the smack over. We can agree to disagree. My gut tells me both fact or pass and the smack over later on will be significant in both North American and global production. Let me give you a brief lithium confidential update. My manuscript is now in the hands of an editor. Once he's made his suggestions I'll have to go back to the book. One more time to finalize it. It will go to a legal review and hopefully the manuscript will be laid out and ready to be printed in May. That's the goal and I thank all the people that have expressed interest but it is becoming a real thing. And the last point. If you happen to hear what sounded like a dog panting in the first couple minutes of this episode I had taken Fiona for a walk before I started to record and didn't realize that her panting in the background would be picked up by the microphone. So my apologies for that. Thanks again for listening.