Why Matt Badiali Is Skeptical Of Lithium Investments


As a seasoned geologist and a skilled investor, Matt Badiali offers valuable investing advice about natural resources. Badiali is currently a contributing editor for Banyan Hill Publishing. In a recent article, he wrote about his predictions for lithium. Matt referenced the Prospectors and Developers Association of Canada’s recent meeting and the many cobalt, graphite and lithium companies that put up booths there. He called those metals the flavors of the month and said that they were the popular subjects of mining speculation. Matt said that there was a long-lasting trend of fad investing in potash, uranium and other rare metals. There are currently 25 graphite companies, 23 cobalt companies and 60 lithium companies on the TSX Venture Exchange, and they make up approximately 10 percent of almost 990 listed mining companies.

Attracting Junior Lithium Miners

Lithium increased from $8,000 to $16,500 per ton in 2018. According to Matt Badiali, lithium mining companies also soared in value.

The main reason why there are so many lithium companies is the current demand for lithium-ion batteries. Demand for lithium increased significantly after more car companies started using batteries, and that left the mining industry unprepared. In 2016, lithium was at $8,000 per ton. It increased to $16,500 per ton in 2018. According to Matt, lithium companies also soared in value. The Chilean company Sociedad Quimica y Minera de Chile is the biggest producer of lithium in the world. It creates the metal from brine. That company’s shares increased from 2015 to 2018 by an impressive 396 percent. Matt said that the company’s massive increase in value lured many junior lithium miners into the market. It also lured miners of cobalt and graphite. To make a lithium-ion battery, manufacturers use graphite and cobalt as well.

Lithium-ion batteries are also used in cell phones, cordless drills and many other electronic devices. Although the hype for these batteries grew quickly, Matt Badiali pointed out their major limitation. The batteries have a power cap, and the most advanced type of lithium-ion battery can only hold about twice as much electricity as the standard version. According to Matt, the batteries are limited by the chemistry behind their value. However, that power cap also limits lithium’s position as the leading battery metal, and it effectively limits the long-term demand of lithium. If companies want to make an improved battery, they can experiment with zinc and silica.

Why Matt Badiali’s Predictions Are Reliable

Matt Badiali earned a bachelor’s degree at Penn State University, and he attended Florida Atlantic University after graduation. He earned a master’s degree in geology there. Matt worked as a geologist for a drilling company after college, and he provided consulting services as well. He is known for being a hands-on enthusiastic worker who is not afraid to talk to people or to take a direct approach to research. He has been to Hong Kong, Turkey, Haiti, Switzerland, Singapore, Papua New Guinea and many other countries around the world for research. Matt has toured mines and oil wells. He has talked to CEOs about their local political factors, resources and laws. When Matt makes a prediction, he takes in-depth information such as this into consideration.

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The Future Of Lithium And Its Accompanying Battery Metals

matt badiali on lithium
According to Matt Badiali and multiple reports, battery metals are expected to begin declining in 2018.

Matt Badiali is not alone in his prediction of lithium reaching its limit soon. Wood Mackenzie is a prominent commodities research firm, and it recently released a report about battery metals. According to the report, battery metals are expected to decline later in 2018. That decline is expected to continue in 2019 and onward. The report says that supplies will exceed demand, which will reduce prices. Although the overall picture shows expected growth from the period between 2017 and 2020, part of that relates to the supply response. The new capacity will take time to achieve, which means that lithium prices will remain high for part of 2018 before they start their long-term decline.

According to the report, the Chinese domestic spot market’s lithium carbonate prices have decreased by six percent since December 2017. However, international prices have remained strong since then. At the end of February, they were $16,000 per ton. The firm predicts a $13,000 average for 2018 and a drop to $9,000 or below in 2019. It forecasts a $6,500 average for lithium carbonate by 2022. Wood Mackenzie expects a gloomy outlook for cobalt as well. Cobalt almost reached a record high recently for the first time in a decade at $85,000 per ton, which was a 70 percent increase from last year’s price. With about 50 percent of its demand tied to battery makers, cobalt reached a high point in the battery manufacturing industry last year. By 2022, Wood Mackenzie expects about 60 percent of the cobalt demand to be linked to battery manufacturing.

The figures for these popular battery metals may have seemed impossible just a few months ago. However, the supply contributions of some companies will lead to a surplus by 2019, and that will continue through 2022. Those surpluses will create a downward trend for prices. The stock build of metals and chemicals along with the potential of supplies will likely keep the price level cap in place. Wood Mackenzie predicts an average of $75,000 per ton in 2018 for cobalt, and it expects the price to drop by $20,000 by 2019. By 2022, the firm expects cobalt to reach about $33,000 per ton.

Matt Badiali’s Recommendation For Metal Investors

At the end of his article, Matt Badiali pointed out the emergence of new mining companies. Rio Tinto is a famous mining giant, and it is launching a new project in Serbia. As one of the largest lithium projects in the world, it will likely be finished in 2023. While lithium prices are still high, projects such as this will make them drop eventually. Matt expressed his skepticism toward lithium investments. When miners rush into new projects based on current prices and the prices inevitably fall, the projects lose their economic value. Matt concluded his article by telling investors to stay away from junior lithium companies.

Click here to learn more about Matt Badiali and Banyan Hill Publishing.

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