Bad News for Lithium Investors

Andy Snyder|May 23, 2023

Capitalism is at work.

For some folks, that’s a costly notion. They’re getting crushed.

For others, though, the opportunity is as immense as the blue sky above.

We’ve been warning about the rush to own lithium producers for months. Folks who followed our oh-so-humble advice are doing well. The price of the “fuel of the future” has been cut in half over the last six months.

The news in late April that Chile was nationalizing its lithium sector got prices to bounce… momentarily. The nation’s government, the market felt, would curb the supply of the critical metal.

Prices have since dipped once again. Capitalism wins every time.

With prices falling so quickly, many once-bullish investors are in despair. They’ve been cut in half and are selling in a panic.

But it’s who is buying these days that has our attention.

Energy behemoth Exxon (XOM) just announced it’s dropped $100 million to get its hands on some 120,000 acres in Arkansas. It’s eyeing up the Smackover Formation as a source of lithium and a way to test out extraction techniques.

Industry rumor has it that the area could be home to some 4 million tons of lithium carbonate. That’s a lot… especially considering the entire world produces only about 120,000 tons annually.

All said, Exxon’s latest purchase could provide enough fuel to power 50 million electric vehicles.

But here’s the thing… the really bad news for lithium prices…

Tricky Business

This $100 million outlay from Exxon is just a tiny slice of its nearly $30 billion in cash reserves. In business reality, it’s little more than an experiment that will likely have a team of just three or four folks running it.

But the effect on long-term lithium prices could be huge.

Ultimately, it’s quite bullish for the EV sector. Cheap fuel is on the way. Deals like this will soon become everyday occurrences.

But it’s hellish news for the many, many investors who were duped by the headlines into believing just one or two regions would produce the world’s lithium. They were tricked into believing that just because sources hadn’t been developed… they couldn’t be developed.

Capitalism is a powerful beast.

It finds opportunity… it uncovers lopsided markets… and it levels the playing field.

Certainly, the world didn’t have many developed pockets of lithium in the early years of EVs. Why would it have? The reward wasn’t there.

But it is now. As usual, the big boys are leading the way.

Lithium supply has been on the rise all year. It’s slamming prices and crushing investors who didn’t do their research.

The pain isn’t over.

But the opportunity for the savvy is just getting underway.

Watch this market very closely.