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Duncan Calder, China Specialist, Argues That Lithium, Cobalt And Graphite Have A Bright Future

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The recent disappointing IPO of Ganfeng Lithium which fell 20 per cent on its first day of trade on the Hong Kong Exchange has had some commentators arguing that the future is looking dim for those seeking to develop lithium, cobalt and graphite projects to meet the supply demands of the burgeoning Electronic Vehicle (EV) market. They argue that this disappointing float may bode ill for rival companies also seeking to float – such as Tianqi Lithium.

Duncan Calder, ex-KPMG Senior Partner and Managing Director of Contour Capital argues that this view misses the point.

“Share markets are always volatile: currently particularly so. US : China trade war rumblings and US midterms uncertainty are right now helping to fuel this volatility. Naturally, that can affect timing and short term prospects for listings of resource companies. But, we must not forget, in the end fundamentals always prevail. Always,” says Calder.

The fundamentals for companies like Tianqi Lithium are strong. The story for commodities exposed to the EV / Lithium Ion battery market – be that traditional large commodity markets like Nickel – or smaller commodity markets like Lithium, Cobalt and Graphite remains unquestionably bright in the long term. Investors should not baulk just because of some short term market activity that appears to be of concern. EV sales are certainly surging in China, but that hasn’t yet translated into the expected uplift in lithium prices as new supply sources hit the market. We must not forget though that the longer term outlook is much brighter as Beijing policy makers actively promote EVs to combat air pollution. China’s commitment to cleaner air has been sustained and unwavering.
Of course when the outlook for EV production is so incredibly positive, there is a rush to start up new mines for these commodities and of course some projects will succeed but many, sadly, will not.

The key, Duncan Calder argues, as always, will be the size of resource being developed, projected production costs (with low quartile the most sought after), logistic obstacles (such as rail and port access), sovereign risk, willingness to cede control of the project and the ability of management to sell the story to investors.

Independent advisers such as Contour Capital that specialise in assisting companies to secure development finance, in particular from the world’s biggest market – the hungry dragon that is China – remain confident that well managed, quality projects will find funding and a pathway to market.

The facts are clear – EVs are coming and they need more nickel, lithium, cobalt and graphite. The world especially needs more Lithium Cobalt and Graphite – it is just a question of which resources companies will best respond to the demand challenge.

Calder, based in the massive resource-rich province of Western Australia, sees his role is to help Australia and Australian resources companies developing projects both within Australia as well as in Eastern Africa to play a larger role seizing this opportunity and not to be sidelined.

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