Respected mining investor Evy Hambro has reportedly warned the industry’s giants not to make major plays in the lithium market at current prices, but believes they would be wise to invest in the sector in the long-term.
Hambro, a fund manager for institutional investor BlackRock, reportedly spoke with the AFR this week, saying the price of lithium – which has risen from US$6,000 a tonne to roughly US$21,000 a tonne in two years – was backed by market fundamentals, but is currently too high to justify acquisitions of smaller operations by major miners.
The big miners, including BHP and Rio Tinto, have largely missed out on the lithium boom, which has been driven by electric car and other battery manufacturing, along with a growing speculative market.
“When you look at the billions of dollars that have been invested by automotive companies, battery producers, governments building recharging infrastructure and the regulatory pressures, it is a trend that is massive and you would not want to get in the way of it,” Hambro was quoted as saying.
“How often are you able to buy into a commodity producer who is able to sell their supply into a market that has strong, structural growth in demand for a long time to come?”
Hambro said market conditions like that in the lithium sector are “very rare,” tending to occur only after world wars, during industrial revolutions, or during “super-cycles” like that seen in China over the past decade.
“We have a substantial part of our portfolio invested in companies in this space and I can see us continuing to have significant exposure in this area for a long time into the future,” he continued.
Glencore has some exposure to the electric battery market thanks to its cobalt production, while several of the big miners are also invested in copper and nickel.
But aside from Rio’s long-term development in Serbia – which is years from production – none of the majors have lithium investments, and Hambro thinks now isn’t the time for them to make acquisitions in the sector.
“These companies do adjust their commodity exposure through time,” he was quoted as saying.
“Would it be a surprise to see some of them go into this area? No. I would be disappointed if they went charging in now because I think prices have run fairly hard, but to build up a part of the portfolio in this area over time is sensible.”