Lithium comes from brines and hard rock sources, which imply very different capital expenditure, operational expenditure and risk profiles. While Australian deposits are hard rock, the ASX provides exposure to both. The miners have been nimble
in understanding the importance of strategic technical and offtake relationships with large offshore partners are they’re increasingly going downstream to sell higher value lithium hydroxide rather than just spodumene concentrate.
I am a geologist by training, having worked in underground gold operations in Western Australia. A technical background is helpful in understanding this space, although I think for many, myself included, the battery metals theme will continue
to be a steep learning curve!
The IFM Small Cap Active Equities team collectively deploys a focused, fundamental stock picking approach, enhanced by quantitative methods and designed to target attractive investments and control portfolio risk.
This involves building a business case for each mining stock and assessing the potential risks and opportunities it faces. We calculate an in-house valuation for each company, and target those that we believe the market is currently undervaluing.
Ultimately, it’s a relative game - if there are, say, ten lithium miners that we can invest in, our aim is to 1) take a view on the appropriate weighting to lithium, and 2) be selective about which stocks we own.