Welcome to Fear and Greed, summer investing series brought to you by Vanta specialists in compliance led to Growth. I'm Sean Aylmer. Lithium has had a tough run lately, with supply flooding the global market, keeping prices of the battery metal down. I wanted to look today at one of the main Australian lithium companies, Mineral Resources. As always, this is general information only and you should seek independent advice before making investment decisions. Gore Sodi is the deputy head of research at Intelligent Investor. Gorera Welcome back to Fear and Greed.

Welcome to Fear and Greed, summer investing series brought to you by Vanta specialists in compliance led to Growth. I'm Sean Aylmer. Lithium has had a tough run lately, with supply flooding the global market, keeping prices of the battery metal down. I wanted to look today at one of the main Australian lithium companies, Mineral Resources. As always, this is general information only and you should seek independent advice before making investment decisions. Gore Sodi is the deputy head of research at Intelligent Investor. Gorera Welcome back to Fear and Greed.

Hi, Sean, thanks for having me.

Hi, Sean, thanks for having me.

Before we get to min rez lithium itself, why does people still believe in lithium, Where something like nickel has no friends anymore, lithium still has some friends.

Before we get to min rez lithium itself, why does people still believe in lithium, Where something like nickel has no friends anymore, lithium still has some friends.

It's feeling pretty lonely as an investor in lithium. I think that's been very generous to say it as friends. Look, lithium certainly was a very popular investment theme, and we see this all the time in commodities. Narrative drives enthusiasm, Enthusiasm drives price, and so a sensible investor in commodities needs to look through the narrative and theme and trying to establish what's happening in the underlying demand and supply scenario. Now, when you do that to these two commodities, let's take a look at lithium. First up, demand for lithium is growing about twenty percent a year. That's still faster than almost any other mainstream commodity. And more important than that, not only is demand rising swiftly, but lithium historically has been sort of a niche metal. So the entire lithium complex needs to grow from being a niche supplier to a very small industry with really small production volumes to being a large bulk supply metal with much larger volumes. And this is going to take many, many decades. It's probably going to take about twenty years to get there, and we're going to see ups and downs. We're going to see in the market. Because this is still such an infant industry, booms and busts are going to happen in spectacular fashion. So look, I'm still I still think there is a pretty decent future for lithium. I was super unenthusiastic in the boom we've been buying lithium in the bust, and I think that's the way to treat what it is in general than lithium in particular. Now applying this lens over to nickel, Nickel for a long time has been known for booms and busts. And one thing has changed recently nickel, which has contributed to I think to a much longer bus period, and that is that China has invested over the last five or six years hundreds of millions of dollars in new processing technology, and they've unlocked a new way to unravel nickel. Rather now, it used to be that nickel you used to sort of had to dig out out of the ground, and you needed a very specific kind of geology to access and process and nickel. There was well known that you could get what's known as the latch write nickel ores, which are nickel ore's where their geology is very complex and you have to do a whole bunch of signs to it to unlock the metal. So China has now come up with a simple, effective, but environmentally disastrous way of unlocking that latchrite ore, and they found Indonesia. In Indonesia a willing partner to put up with the capital intensity and the environmental damage. So a combination of Chinese money and know how and Indonesian willingness to put that to work has meant there's been an absolute explosion in nickel supply. Nickel demand has not changed very much. Nickel supply has completely been upended. I think nickel has been disrupted and we're not going to see nickel rise to the same extent it had been in the past. I think this is industry that has been upended.

It's feeling pretty lonely as an investor in lithium. I think that's been very generous to say it as friends. Look, lithium certainly was a very popular investment theme, and we see this all the time in commodities. Narrative drives enthusiasm, Enthusiasm drives price, and so a sensible investor in commodities needs to look through the narrative and theme and trying to establish what's happening in the underlying demand and supply scenario. Now, when you do that to these two commodities, let's take a look at lithium. First up, demand for lithium is growing about twenty percent a year. That's still faster than almost any other mainstream commodity. And more important than that, not only is demand rising swiftly, but lithium historically has been sort of a niche metal. So the entire lithium complex needs to grow from being a niche supplier to a very small industry with really small production volumes to being a large bulk supply metal with much larger volumes. And this is going to take many, many decades. It's probably going to take about twenty years to get there, and we're going to see ups and downs. We're going to see in the market. Because this is still such an infant industry, booms and busts are going to happen in spectacular fashion. So look, I'm still I still think there is a pretty decent future for lithium. I was super unenthusiastic in the boom we've been buying lithium in the bust, and I think that's the way to treat what it is in general than lithium in particular. Now applying this lens over to nickel, Nickel for a long time has been known for booms and busts. And one thing has changed recently nickel, which has contributed to I think to a much longer bus period, and that is that China has invested over the last five or six years hundreds of millions of dollars in new processing technology, and they've unlocked a new way to unravel nickel. Rather now, it used to be that nickel you used to sort of had to dig out out of the ground, and you needed a very specific kind of geology to access and process and nickel. There was well known that you could get what's known as the latch write nickel ores, which are nickel ore's where their geology is very complex and you have to do a whole bunch of signs to it to unlock the metal. So China has now come up with a simple, effective, but environmentally disastrous way of unlocking that latchrite ore, and they found Indonesia. In Indonesia a willing partner to put up with the capital intensity and the environmental damage. So a combination of Chinese money and know how and Indonesian willingness to put that to work has meant there's been an absolute explosion in nickel supply. Nickel demand has not changed very much. Nickel supply has completely been upended. I think nickel has been disrupted and we're not going to see nickel rise to the same extent it had been in the past. I think this is industry that has been upended.

Okay, so based on that, let's think about investing in lithium mineral resources. Is it must be close to the biggest lithium company. Maybe Rio will come the biggest lithium company on the IX two hundred. But at the moment is that MinRes.

Okay, so based on that, let's think about investing in lithium mineral resources. Is it must be close to the biggest lithium company. Maybe Rio will come the biggest lithium company on the IX two hundred. But at the moment is that MinRes.

MinRes is fighting with Pilberg at the moment right whereas has probably it probably beat them to it. But certainly MinRes is very very large.

MinRes is fighting with Pilberg at the moment right whereas has probably it probably beat them to it. But certainly MinRes is very very large.

Yes, it's had a really rough twelve months though, and in fact, I think of the top two hundred one of the worst performers over the last twelve months is MinRes. CEO issues, governance issues, the whole lot. Where do you think MinRes sits or should it sit in a portfolio.

Yes, it's had a really rough twelve months though, and in fact, I think of the top two hundred one of the worst performers over the last twelve months is MinRes. CEO issues, governance issues, the whole lot. Where do you think MinRes sits or should it sit in a portfolio.

Yeah, this is a really important question. MinRes is the business that we've owned, and I've owned personally for many, many years, and for many years it's been a fantastic investment. This has been a disastrous year for MinRes. There are three parts of this business. There's a mining services business, a lithium business, and iron ore business. Mining service is going splendidly. I know they've invested a lot of money to improve the quality of that business, and I think that's going to be fine. Lithium has been absolutely crunched. MinRes is lithium massets. I would say asoso the average Pilborough has far better quality assets, and so this is going to be a large producer, but a higher cost producer that requires high prices to get lithium kicking along. I think the long term future for MinRes is probably not as a natural owner of multiple lithium mines, but probably as a service provider to the lithium industry. So I think the opportunity for MinRes is not so much to increase production and grow its lithium mining portfolio. It's probably to separate that portfolio from the main business, and we just need higher prices for that to happen. So there's a lot of asset value here shown, but currently with prices where they are, that value is not being realized and it's sensible that the market should price those cheaply. But in a different pricing environment, I think we'll see the value of those assets change quite dramatically. The rule for resources is you buy in gloom and you sell in boom. That's the lesson here as well.

Yeah, this is a really important question. MinRes is the business that we've owned, and I've owned personally for many, many years, and for many years it's been a fantastic investment. This has been a disastrous year for MinRes. There are three parts of this business. There's a mining services business, a lithium business, and iron ore business. Mining service is going splendidly. I know they've invested a lot of money to improve the quality of that business, and I think that's going to be fine. Lithium has been absolutely crunched. MinRes is lithium massets. I would say asoso the average Pilborough has far better quality assets, and so this is going to be a large producer, but a higher cost producer that requires high prices to get lithium kicking along. I think the long term future for MinRes is probably not as a natural owner of multiple lithium mines, but probably as a service provider to the lithium industry. So I think the opportunity for MinRes is not so much to increase production and grow its lithium mining portfolio. It's probably to separate that portfolio from the main business, and we just need higher prices for that to happen. So there's a lot of asset value here shown, but currently with prices where they are, that value is not being realized and it's sensible that the market should price those cheaply. But in a different pricing environment, I think we'll see the value of those assets change quite dramatically. The rule for resources is you buy in gloom and you sell in boom. That's the lesson here as well.

Grev, thanks for your time this morning. Thanks Sean as Gorev Sony, Deputy head of Research at Intelligent Investor. Remember to get your own independent advice before making decisions. This is Fear and Greed Summer Investing series, brought to you by Vanta. Vanta automates compliance for frameworks like ISO twenty seven one, SoC two, CPS two three four in essential late saving time and money while building trust. Join over eight thousand companies like at Lassian, Dovetail and fire Ant managing real time risk in one thousand dollars off at Vanta dot com. Slash Fear and Greed. I'm Sean Elmer. Enjoy your day.

Grev, thanks for your time this morning. Thanks Sean as Gorev Sony, Deputy head of Research at Intelligent Investor. Remember to get your own independent advice before making decisions. This is Fear and Greed Summer Investing series, brought to you by Vanta. Vanta automates compliance for frameworks like ISO twenty seven one, SoC two, CPS two three four in essential late saving time and money while building trust. Join over eight thousand companies like at Lassian, Dovetail and fire Ant managing real time risk in one thousand dollars off at Vanta dot com. Slash Fear and Greed. I'm Sean Elmer. Enjoy your day.