Hi Bluegoose - top marks for your insight about a possible life changing event. Following are some reasons why I think
we are about to witness a phenomenon, which will happen exponentially quickly and, which will last for many, many years.
Efficient energy capture and storage will be the sector to be in. Lithium ion batteries will be a huge part of it (even though there is a lot of lithium in the world, and new technology will replace it one day. That won't happen for a while though – there's too much baked into the current cake – so there will be many years of super-profits to be made). In the meantime, I see it as a good environment to share the spoils - when
the trend is your friend.
We can participate not just as consumers but also as shareholders. In that regard,
first in-best dressed. Lake has ~170,000 hectares in the "lithium triangle" in Argentina, from which I understand about half of the world's lithium currently is being produced. Moreover, that's over 4 project areas, which they insightfully pegged early, in excellent addresses, including adjoining Orocobre's producing acreage. Lake's acreage covers both brine (better quality product?) and hard rock (cheaper and quicker production?) so that gives development options. Nearby acreage has changed hands for huge amounts.
Through a fateful alignment of numerous factors, this is THE time for affordable, reliable battery storage for everyone and thus for lithium producers, which is Lake's opportunity:
- We've been spooked about energy security for so long – at least since the oil shocks of the 1970's – that people are motivated to have reliable, affordable power.
- We're all loaded up with energy consuming devices, especially since the iPhone in 2007 made us aware of the power of personal devices. We're all personally attuned to the importance of battery power.
- Environmental disasters have made people long for low risk energy sources – think Chernobyl, and BP's Gulf of Mexico incident a few years ago. Think solar + cheap storage …
- Lobbyists have been extremely effective – not always by fair means - in advocating the use of renewable power, which inherently appeals to us all. So far, it has been expensive and unreliable but that is changing rapidly with recent exciting advances with solar energy capture. That drives industry to find ways to store energy affordably. Did I mention batteries?
- Governments and corporations have been screwing consumers with excessive charges – e.g. inducing them to generate their own power and sell it back into the grid, then failing to honour the pricing arrangements in those contracts. (Having seen the calibre of most current politicians, that's not going to get any better). Our power bills kept rising even though the oil price has crashed in the last few years. Consumers fantasise about getting off the grid by being able to store and use their own reasonably priced power. More batteries needed…
- Scandals like VW being caught out cheating with "Dieselgate" have caused corporations and Governments, to accelerate the transition to electric cars. Bear in mind that an electric motor has about 1/100th the number of moving parts of an internal combustion engine, so maintenance costs on them will plummet. Consumers will rush to electric vehicles as the prices fall, and Governments restrict the sale of other vehicles. More batteries needed – lots more...
- There have been tremendous improvements in generating power from the sun, and in battery technology, with even greater improvements expected ahead. That will allow us to store cheap power (whether off-peak or say from solar) to use in peak times when usage rates may be higher. This will have implications in for us all - from the polar ice caps to the tropics - and will lead to even greater demand, for some years at least, for lithium (among other things), as a battery component.
- There will be increasing demand for battery powered options for all sorts of equipment – not just power tools but bicycles, lawnmowers etc. e.g even our pool pump (which costs us ~$2/day just in power!).
To me,
Lake is superbly positioned: geographically + good Board + market cap. of under A$20M (only 227M shares on issue) gives tremendous upside to demonstrate what lithium they have, then profitably develop it (or sell out to one of the big users, some of whom inevitably will buy successful explorers, to secure supply). Anticipating a multiples re-rating as they move towards drilling their highly prospective acreage, I've therefore bought a lot of them.
