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Discussion Starter · #1 ·
Clearly motorized and vehicles will be moving to EV technology. Big issue is finding the necessary materials and seems like an obvious investment opportunity if one can invest is the right miners. Is anyone investing in this sector? if so what is their strategy.
 

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I have been considering if there is currently an investment opportunity in EV and if so how. Many are saying the way to play this space is with semiconductors. Many of the materials that are or will be used in EV tech will need to be mined. I do not know enough about which minerals will be the front runner. Due to the uncertainty I find this to be a more risky investment. If I were to make an investment space I would be looking at base metals instead. I believe there is likely less upside but potentially less risk for me. I think it mainly comes from my lack of understanding of EV tech but have a good understanding of mining in general. I foresee potential capital expansion into nickel and copper.
 

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I think copper is potentially another good EV play (not sure if the ship has already sailed in terms of investment opportunity though). ICE vehicle has something like 3 lbs of copper where as EV's have 50+ lbs of copper (due to all the wiring, etc)
 

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Discussion Starter · #6 ·
I do own Tech Resources so I have some solid exposure to copper. I took a small stake in Albemarle [ ABL] and Lithium Americas. They are both plays on lithium . Cobalt seems to be a by product from refining copper ore so Tech should help on that front. Clearly the auto industry has decided to move toward EVs and they will need these elements. The lithium buys are speculative and that is why the positions is small[ 5k each] . In any event they will give me an eye on this developing story.
 

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I think for 90% of the car it's the same mix of steel, aluminium, copper, rubber, urethane, vinyl and so forth as for any other car.

Lithium can be messy to refine.
While this is true, lithium Ion batteries contain hardly any actual lithium. They are mostly nickel, copper, aluminium and carbon by weight with a weird organic solvent electrolyte. The lithium is present dissolved in the electrolyte and the physical quantities are pretty small. Cobalt and nickel would be the potentially investable components.

Specialized materials in EVs are mostly in motors -- any permanent magnet motor is going to be using rare earth magnets, so neodymium, cerium, samarium. The main producers are in China.
 

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Discussion Starter · #8 ·
I think for 90% of the car it's the same mix of steel, aluminium, copper, rubber, urethane, vinyl and so forth as for any other car.


While this is true, lithium Ion batteries contain hardly any actual lithium. They are mostly nickel, copper, aluminium and carbon by weight with a weird organic solvent electrolyte. The lithium is present dissolved in the electrolyte and the physical quantities are pretty small. Cobalt and nickel would be the potentially investable components.

Specialized materials in EVs are mostly in motors -- any permanent magnet motor is going to be using rare earth magnets, so neodymium, cerium, samarium. The main producers are in China.
Yes small but necessary and rare.
 

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and rare.
Lithium? Not rare at all. Cheap like borscht, readily available all over the world and used in dozens of applications aside from batteries. Batteries is a high and growing proportion of use, but there is no particular bottleneck or limit in availability. Lithium primary (non rechargable) batteries use actual metallic lithium and use more material than the rechargeable Li Ion type.
 

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Discussion Starter · #10 ·
Lithium? Not rare at all. Cheap like borscht, readily available all over the world and used in dozens of applications aside from batteries. Batteries is a high and growing proportion of use, but there is no particular bottleneck or limit in availability. Lithium primary (non rechargable) batteries use actual metallic lithium and use more material than the rechargeable Li Ion type.
interesting. The people that follow the development of EVs says securing adequate supplies of metals including lithium is a major challenge. GM just signed a deal with Glencore to supply it with lithium . Tesla has taken special steps to secure its supply of lithium. If the industry moves to manufacturing multi million EV vehicles per year there will certainly be demand pressure. For something that isn't rare its hard to explain why it price has exploded to extraordinary levels. Anyways as I said I just took a small position so I can keep an eye on this segment.
 

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adequate supplies of metals including lithium is a major challenge
IMO copper is a greater constraint than lithium. I found this which I kind of agree with:


Even at today’s lithium reserve levels, however, EV manufacturers could produce 45 million units annually for 78 years. That reserve-to-production ratio is higher than that in either copper or oil.
Their main observation is that setting up new production is expensive and low-margin, so it creates breathing room for existing producers to enjoy high profitability until the price is sufficient to incentivise new producers.
 

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Discussion Starter · #12 ·
IMO copper is a greater constraint than lithium. I found this which I kind of agree with:




Their main observation is that setting up new production is expensive and low-margin, so it creates breathing room for existing producers to enjoy high profitability until the price is sufficient to incentivise new producers.
Good point so the EV industry is stuck with the current producers until other costly projects can catch up. That sounds like supply problem. Sounds like a opportunity for a couple of years.
 

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The challenge with this sector is finding a way to be actually make money as a shareholder today. A lot of lithium companies either got to or are at such ridiculous valuations, everything is already priced in. A lot like buying overvalued tech stocks before they actually make money. So much can go wrong with a mine. One flooded mine or one bad jurisdiction/government and poof there goes 50% of your money, or more. A bad mine or environmental disaster can create negative equity.

My only play in this space is Teck and that is because they are generating massive cash flow and profits today, and are paying dividends and buying back shares. When the copper shortage hits, they will be in a pretty awesome position to return even more to shareholders as their copper production doubles this year, not in 5 years. And it's not expensive, just above P/E of 4, 3 times cash flow, 2.5 times EBITDA, not counting the new revenue coming online.

Any new mine has to eat the full effects of inflation today and will have record high marginal costs to develop it - labour, material shortages, extra pressure on royalities, you name it. Teck has the producing mines today and is only reasonably expanding. It's the only way I would be involved. There could be other companies but every time I look, they aren't nearly as profitable even with record high revenues.
 

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A lot of lithium companies either got to or are at such ridiculous valuations, everything is already priced in.
Personally, I think lithium as a critical material is greatly over-hyped by the popular press. Average folks are not familiar with it as a raw material and its many uses. They assume it must be super rare and because it's in the name of the battery, assume that the battery is mostly made of lithium, but a 400kg EV battery pack only has 8 or 10kg of lithium in it. Compared to the amount of nickel and copper, it's bubkes. But you've got motley fool and the like out there pumping up junior miners and inflating prices of lithium producers as a speculation.
 

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The challenge with this sector is finding a way to be actually make money as a shareholder today. A lot of lithium companies either got to or are at such ridiculous valuations, everything is already priced in. A lot like buying overvalued tech stocks before they actually make money. So much can go wrong with a mine. One flooded mine or one bad jurisdiction/government and poof there goes 50% of your money, or more. A bad mine or environmental disaster can create negative equity.

My only play in this space is Teck and that is because they are generating massive cash flow and profits today, and are paying dividends and buying back shares. When the copper shortage hits, they will be in a pretty awesome position to return even more to shareholders as their copper production doubles this year, not in 5 years. And it's not expensive, just above P/E of 4, 3 times cash flow, 2.5 times EBITDA, not counting the new revenue coming online.

Any new mine has to eat the full effects of inflation today and will have record high marginal costs to develop it - labour, material shortages, extra pressure on royalities, you name it. Teck has the producing mines today and is only reasonably expanding. It's the only way I would be involved. There could be other companies but every time I look, they aren't nearly as profitable even with record high revenues.
It is definitely the best known name and is trading at a good valuation. I have it on my watchlist as well as Lundin Mining. Teck is probably the safer play and has about 3x the market cap and many more mines in operation. Last time I checked Lundin had a better ROE, lower debt, surplus cash and higher margins. If I do decide to buy in this space it would be a toss up between the two for me.
 

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Discussion Starter · #16 ·
It is definitely the best known name and is trading at a good valuation. I have it on my watchlist as well as Lundin Mining. Teck is probably the safer play and has about 3x the market cap and many more mines in operation. Last time I checked Lundin had a better ROE, lower debt, surplus cash and higher margins. If I do decide to buy in this space it would be a toss up between the two for me.
Teck has some copper sites under development and I believe they will be in production in 2023. It currently produces about 7 million tons of copper per year and the new mines will be upping that by a significant amount..
 

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Discussion Starter · #18 ·
Did some more research on this subject. Clearly the ramp up in green infrastructure and TVs means a big demand for copper and other metals. I bought about 10k of First Quantum . They have excellent copper production and assets. I bought about 7k of Finning International. The growth in mining development and production places a strong demand for heavy equipment. That is right down their alley. The number of EVs which will be produced over the next three years will in the many million . VW expects to produce 3 million for 2022 and 2023. Tesla is already producing over 2 million. GM , Ford,the Koreans and Europe are moving full bore into EV manufacturing. The trend is your friend.
 

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I think FTT is a great route to go with this theme by opting for the picks and shovels instead of the metals themselves. I had been eyeing CAT for sometime as a general mining and infrastructure play (Deere as well for an ag play).
 

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Discussion Starter · #20 ·
I think FTT is a great route to go with this theme by opting for the picks and shovels instead of the metals themselves. I had been eyeing CAT for sometime as a general mining and infrastructure play (Deere as well for an ag play).
Deere is in the heavy equipment business as well. Brandt Equipment distributes and sells their products in Western Canada.
 
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