Patient Investors: Look Here


Fancy a short hop across town? Let’s get an air taxi! Okay, it’s not something you’re going to say tomorrow. But give it about five years.

What am I talking about? The Financial Times reports that a German company has built an electric, five-seater jet that it plans to use for public transportation. It pegs 2025 for the full launch period.

You’ll be able to travel 300 kilometres in 60 minutes. Hey, I’m from Melbourne. If there is any way to avoid Punt Road (going to the north of the city from the south for me), I’ll pay!

The Germans seem to think it won’t cost much more than a standard taxi does now.

Now, this is something to get excited about, isn’t it? I’m utterly bored of Trump’s trade war and the endless drivel about the RBA and the Fed.

It certainly sounds cool. Apparently, the jet takes off and lands vertically. Air taxis could be a US$1.5 trillion industry.

There’s simply so much to be positive about the future. One (private) company to keep an eye on is Dyson. You might know them for their vacuum cleaners.

But they make a range of products. My colleague Shae Russell says their hair dryer is amazing (at a hefty price!). 

Dyson has already made it public that they want to create a niche electric car. They expect it to be on sale by 2021.

The interesting thing here is that the battery may not be the standard lithium one used now. My colleague Jeff Brown says Dyson paid US$90 million for a battery company as far back as 2015.

The company was called Sakti3, and Jeff says they had a solid state battery with higher power density.

When a billion is not enough

I find this interesting in the context of the current discussion around electric cars. We know Volkswagen came out this week and said it was going to spend US$1 billion on a plant in Germany to produce battery cells.  

But even this may not be enough to finance a smooth transition from petrol cars to electric ones.

Meet Joe Lowry. He’s a lithium expert who shot to prominence at the same time the lithium story started taking off over 2015 and 2016.

Señor Lowry is currently in Australia and presented at a mining conference this week. Australian Mining reports that he told the crowd that the lithium supply chain needs US$12 billion in investment for the supply to meet the roaring demand.

One reason is because this is not simply about cars. As above, planes, trucks and motorbikes are going electric too. Then we have scooters and energy storage as well.

The problem we have right now is that it is not exactly clear where this financing is going to come from. A significant chunk of new lithium supply has been brought on by junior miners in Australia.

However, there’s now a persistent idea that there’s too much lithium supply coming online and investors have largely ditched the story.

I think this will change in time. We’ve already seen Wesfarmers make a bid for Kidman Resources.

We got some more interesting news around lithium this week as well. Galaxy Resources revealed that it’s now going to be the largest shareholder in fellow lithium stock Alliance Minerals.

Alliance’s Bald Hill operation in Western Australia holds a lot of exploration potential. Alliance also has a strategic alliance with a Chinese firm that buys the raw material. It’s increasing its investment in Alliance, too.

It’s not 2016 anymore

So clearly, players close to the industry see an opportunity to invest and expand while others don’t. This is, however, the kind of situation where you need to know what type of investor you are.

It’s probably a very good idea to pick over some lithium stocks on the ASX right now. Their share prices are fairly beaten up since the peaks of 2017.

But it may take some time for that kind of punt to pay off. It will be based on genuine industry development and strong pricing if it’s going to work.

However, it wouldn’t surprise me in the slightest to see super funds and major miners buy into these companies to enhance their green credentials.

This is to say that the hype phase of lithium has gone now. It’s unlikely we’ll see the rapid gains as in 2016. Those were in the hundreds of percent.

The market doesn’t usually give you the chance to make big money like that twice. The world moves on to the next ‘hot’ sector.

In 2019, I think that’s going to show up here.

Best wishes,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch