 So thank our panellists in advance, because I'm sure they can say something interesting. Our panel consists of, starting up this side here with Dom Brubar of Avalon Advanced Materials. We have A.G. Griffin here of Lithium Australia, we have a cool clip of International Lithium Corp and we have Tim McCutcheon from Wealth Minerals. The topic is rather an interesting one that we have here, it's Lithium exploration slash M&A market and they're actually sort of, in my perception, two different issues because we haven't really seen any takeovers of Lithium explorers. So I'd like to take these questions and then throw out to a panellist here, what is the direction that Lithium exploration will go along in the next several years and what is going to be the evolution of the M&A situation in the space, particularly in light of the fact that we've seen so little M&A out until now, are we going to see more or is it just not going to happen? Because if we go back, we look at the rare earth space, there was really, except for the M&A composition in the materials, I can't think of another takeover of a rare earth company, despite the fact that there were so many of them at one point. So is it going to be different in the Lithium space? Interesting to look at there. Now the big mother of M&A deals in the Lithium space in the last decade was the Talisman deal, where Talisman was acquired by a Chinese group and Rockwood, and of course Rockwood was then taken over by Albemarle and it was all wrapped up there, but so they sort of shared that ultimate ownership of that thing, but that was a deal that was over 700 million Australian dollars. So it set the bar very high on M&A in the Lithium space. So what I'll do is, instead of dealing with the Lithium exploration first, I will ask you a question about the M&A in the Lithium space, and first I want to throw out an idea that's basically to me, is that Tesla is the inevitable deal that probably won't happen. Now by Tesla here, I don't mean Tesla getting taken over, but I mean Tesla being a protagonist in the acquisition of companies in their supply chain, and they've steadfastly refused to not only acquire companies in the battery and rare earth supply chains, but they've actually walked away even from some deals like we saw with Bacanora in Mexico, and they just think that they're going to survive just in time and that people will provide them with the product because they're Tesla. So I'd like to go through our panel here, starting with Don, and you know, deal with this contention. Why is Tesla not being a protagonist in the space, and do we need to see them, or do we need to see them or somebody else become a protagonist from the end users of the Lithium batteries, Lithium ion batteries? Don? Well I've never talked to them to fully understand what their strategy is on it. It is a bit difficult to understand looking at it from the outside in, given the critical importance of Lithium and the formulation of the energy storage solution for their electric vehicles, I would have thought they would be a little bit more proactive than they have been in terms of securing supply. Presumably there is a strategy there somewhere. Obviously they did have some strategy in terms of inspiring more investment in exploration through those MOUs they entered into with Pure Energy and Bacanora. That certainly did inspire other players, explorers, to start looking for opportunities to find Lithium exploration properties and start investing in those. But their longer term strategy on securing supply, I don't have any real insight, and I wonder whether they have really thought it through from a security supply standpoint in the long term, and perhaps some of the other panelists have some further insight there. Kirill? Yes, let me introduce myself. I'm Kirill Klip. I'm representing the International Lithium. It's a very interesting question and we all remember how Elon Musk called our beloved Lithium just a salt on a salad. But now I hope that this situation is changing because without that salt it's very difficult to digest any of that salad. And what I can see in the industry and I can talk a little bit on part of Chinese companies who are very aggressively building now the secure supply in our industry. And one of them, Genfeng Lithium is our co-stone investor, cornerstone investor and financing to our joint venture project. I can see that this MNA is coming and definitely the moment is below radar screens of the most investors because this MNA comes when companies like Genfeng acquiring Lithium takeoffs. We just witnessed recently the deal with Spielberg, when they bought just 5% stake in the company, but securing 70% of supply from that company. Or another deal just recently, Lithium Americas, which is still subject to approval by Chinese authorities. When again, Genfeng is acquiring 20% in the company, but securing 70% of off-take with Lithium Americas. Or case like with us when Genfeng has right to 80% of our project in Mariana where we just announce our resources. Please tell me when to stop because I can throw quite a few numbers. We'll progress along. Out of that comes the idea that are the Chinese the smartest guys in the room in the Lithium space? There's a lot of publicity about Elon Musk and his innovator and his leading edge of things, but in the Lithium mining side is he falling behind and the Chinese have got a real perception that there could be a brewing supply crisis and they're dealing with it. What are your thoughts, Gen? My view has always been there is no supply crisis. The world is certainly well resourced with respect to Lithium. There's a supply chain bottleneck, which at the moment exists in China and it's the conversion capacity in China that's creating the shortage in the market. It's certainly not a supply of raw materials. I'll make one comment with respect to Elon Musk and the ability to take over companies further down the supply chain. I think to some extent his current position is driven by US politics and the fact that he has an agreement with two governments in the United States, the federal government and the state government of Nevada, that to a large extent compels Tesla to take many of those products from mine gate to motor vehicle. If you're going to do that in North America, someone tell me who the Lithium supplier is that you're going to take over. It's obvious that those couple of deals that he did early in the piece would have satisfied those requirements, but at the moment there aren't many people standing that you could take over to fill that space in North America. With respect to the Chinese and then being the smartest guys in the room, I think you've only got to look at the strategy with respect to the attack that they're having on the Australian Lithium industry and they really are everywhere and mergers and acquisitions aren't something that hasn't happened in the past or the recent past just ask Chris Reid. Chris has been involved in that sort of activity for some period of time and I can tell you Perth is a very small community and I can tell you it's full of Chinese people at the moment looking at Lithium operations. Tim, do you have any comments about what the Chinese are doing? I think one of the key things is there's two parts to your question. If you think about the Chinese and then Elon Musk and it sort of captures the bigger hole. Henry Ford used to own steel mills and then he realized that was stupid and he got rid of the steel mills and I think that the idea of Tesla owning a mining company or a mining operation is not going to happen. I think it's very obvious that there's some synergies there but I think the reality is it's not going to happen because there are plenty of people who are much better qualified to do it than an automaking company or a battery company to do it. It's sort of like asking, you know, Apple's not going to buy an aluminum plant because they use aluminum in their iPhones. So I think that the industry, at least industry observers have been looking in the wrong direction. The automakers, you know, obviously aren't, I think, the natural partner, bio partner, M&A partner for the Lithium industry. It's got to be more people who are involved in the mining space. Frankly, I don't think it's the usual suspects in terms of, you know, BHP and Rio Tinto and those guys. I think it's more of the fertilizer companies because they actually have, at least in the Lithium brine space, they actually have know-how when it comes to potassium and Lithium. So that's number one. The flip side, though, which may cause my prediction to be wrong, is the problem with all the guys in all of these companies is they're all really smart ex-McKenzie analysts and they have very little concept of, you know, supply and demand. There's the demand curve and supply curve and they meet somewhere and then there's a price and everyone's happy. They don't realize that supply can fall off a cliff. They don't really see that, that at a certain point at any price you're not going to get the Lithium you need. I can understand, Adrian here talking about that there's not a supply problem. I think in the long term there probably isn't a supply problem. I think in the short term there are some serious mismatches in terms of what people say they're going to do and what actually exists in the market today. You know, we have BMW, Mercedes-Benz, BYD, all of these guys building Gigafactories and I'll be damned if you can figure out where they're going to get the Lithium for all this stuff. So in the short term, when the McKenzie consultants and internal guys are saying, oh, it's not a problem. You just go out and you put the commodity. You know, when I was in business school, commodities were poo pooed. That's what the losers do, commodities. They don't realize that if it's not there, it's not there. It doesn't matter how much money you throw at it. And I think that's going to be the main surprise and challenge for the industry is how can we make sure that there isn't... We like supply deficits because they make prices higher. We don't like when supply deficits are persistent because then it makes people look for other things. Interesting that you mentioned Henry Ford there because of course Henry Ford built the steel plant. So I agree totally with you that he didn't really need to do it because the US was self-sufficient in iron ore production and had its own steel mills. That was not a problem for Ford. He just wanted to be vertically integrated so that he had 100% control of his process. But if we look then at Tesla, can Tesla really put their hands on their heart? Tesla or any of the auto manufacturers, I mean we're making Tesla a bit of a whipping boy here, but can they put their hands on the heart and say that they can be sure that they will be able to get as much lithium for the battery process? Which it's not of course Tesla that's making the batteries, it's Panasonic who are a tenant within the Gigafactory and if anything it should be Panasonic that is acquiring. But it's a corporate culture thing. Yeah not totally. Corporate culture is commodities or what you know commodities, commodities. But that's corporate culture that has risen since the 1970s. If you go back you would see the Goodyear for instance used to own rubber plantations so that it could make the tires out of them. So what's Goodyear wrong? When were Goodyear's best years? They were when it was a vertically integrated company. Now what is it? It's basically been run out of business or reduced in its market share to an also rep. So if you don't protect your supply chain and you rely upon new upcoming producers who as we can see from Neon Metals and from various other companies particularly Ganfeng going and doing deals with all over the place that the Chinese are going to have secured their supply. Tesla is relying on the power of prayer to get its supplies of lithium. It's just hoping that a tiny little junior somewhere and when it comes down to it we're looking at you know companies with you know two or three hundred million market caps are tiny in comparison to Tesla. That is the feat of playing of Tesla because they're relying upon really small companies that have very difficult fundraising situations as if these are guaranteed that these people will be able to get to the finish line and provide the product that they want. But let's move on from that there and let's have a look at the lithium exploration space and I mentioned before the rare earth space and of course in the rare earth space there were 300 companies 200 300 who knows you know the various numbers are bandied around. Can a panelist make a projection about and you know in broad numbers not specifics how many years in juniors does the market actually need considering that the 300 rare earth companies about now being reduced down to like 10 to 15. So how many years in juniors do we need? Let me just start. Yes please. Well I think the market will decide that at the end of the day. I think you're seeing a similar phenomenon as we saw with rare earths. I live through both as you know in that a lithium resource or occurrence of some consequence that might merit further exploration is not that hard to find. So an exploration company looking for a lithium asset to make a story around to do some promotion on race capital and do some exploration can find a lithium project to explore relatively easily just like we saw rare earth. So I suspect there'll be lots of companies will enter the game because the sort of cost of opportunity to get into it is not that great. They're easy to find early stage prospects and all over the world actually but there will be an inevitable shakeout down the road because there'll be it'll be oversupplied with exploration properties that many of which will will not merit further development going forward. Maybe that creates M&A activity later on. There'll be a few good ones obviously good discoveries that are made that will start to serve that market but I'm seeing kind of similar phenomena as we saw with rare earths although the big difference with rare earths compared to this lithium interest now is that there's much more substance to it in terms of there being a real supply-demand deficit that's creating the interest as opposed to it being mostly politics of China that created all the interest in rare earths 10 years ago. Kirill? Yes please if I may maybe to turn this conversation a little bit around and definitely we have already a lot of lithium wannabes and I call it lithium 2.0. First one we have around 2009-2010 when it was more than 100 companies searching for lithium but I would like to give you few numbers maybe still a lot of people missing it and number one will be why people missing because we have total disconnect between the potential value or necessity of lithium as a critical commodity for our energy revolution and amount of money available in the west for example in 2016 all lithium market by sales was just one billion dollars last December all lithium market by sales was just 2.5 billion dollars it's enormous growth but the market is so small and now I will throw you few numbers increase will be the best person to talk later what it takes to put lithium mine into production I will just give you top of my head let's say lithium americas just confirm feasibility study it will be 450 million dollar capix operation neometals again you can check this crease but any kind of spodiment production it takes you to put in place five to seven years with a very good help of god and investors and it will bring you north of half a billion dollars so we're talking about total disconnect in the west and unfortunately I have to send this message to everybody here that now we are at the total mercy of chinese companies and I'm not telling that it's better good but I think that a lot of people still getting into the Tesla stories they still only trying to understand how many cars will be electric I can tell you my personal message I think that all cars will be electric and it means total dramatic change at the moment according to different studies chinese actually controlling 70 percent of lithium hydroxide market in the world and this is the particular chemical which goes into Tesla batteries among two companies TNC and Genfeng they controlling majority of the 70 percent so when Tesla will wake up to this situation that actually NSA cathode is delivered to them still from japan even now even when they build this gigafactory I think unfortunately it will be too late because we have all these investors potentially here all analysts here but when you start to talk to the people and you throw in numbers the market is so small that it takes us all this time now almost 10 years from lithium 1.0 to lithium 2.0 when people can really allocate enough capital for all those juniors maybe now north of 100 in the world searching for the lithium and maybe only 10 of them will put something into production yeah that's an interesting point there because if we go back to the rare earth space again the within the the first two years of the rare earth boom there were very large capital raises and in the lithium space which was really a boom of 2016 we saw a mere fraction the amount of money that was raised in the the rare earth boom now of course as we know most of the money in the rare earth boom was actually lost um but there are companies out there in the lithium space who are going to be the next generation so we've got at the moment you know you've got the neometals you've got the galaxies you've got the nemasters uh the lithium americans etc or a coral reef that came out of the the third they're the children of the first lithium boom um who are going to be the children of the second lithium boom and um well there's a bit of a loaded question for our panels because of course they're going to think that they are um but um well talk more about the dynamic though um because there has been a lot less capital raised in this boom than there was back in the rare earth boom and it means that many companies in my perception um for instance uh we've we've had a lot of companies have been doing exploration light programs they haven't been doing the PEAs and the PFSs maybe they're not in a position to do them but there is a process where you do surface sampling you do drilling do more drilling um you do a PA you get a resource estimate then you move towards a PEA PFS blah blah blah um but you know some of these parts of the process take two three million dollars more for the drilling then to just produce a document like a PA can cost three million dollars would you not agree that's cheap okay so it's cheap um so they're going to need more money than that but are the companies being given the money to do the first steps the exploration and i saw last year a lot of lithium juniors were able to do raises of 200,000 300,000 500,000 that is sort of keeping the lights on money um it was not the type of money that would fund a really big program that would get you over the hill towards the PEA um would you like to comment on on how much money the space needs the junior space needs um to do these various phases um to uh to get towards um being the next generation in three four years from now of the subsequent um uh projects that are going to um be added to this this increasing demand because we know that these these projects in Australia and Latin America are you know going to be producing pretty shortly um but then they'll need to be you know more i'm not sure there does need to be more but uh if i if i can go back to the first part of your question a long ago Chris you've given a fairly extensive commentary there sorry about that and the question was do we need the the juniors there um and will we see many of them disappear i think the supply chain is such that you don't actually need them there and this is not touring mode book it's completely the opposite but i think if you if you look at the the structure of the industry you talk about things like idle capacity you've got to ask yourself why is there one mine at the moment producing 40 of the world's output on nine nine shifts of fortnight why don't they put on 14 shifts of fortnight or why don't they go to three shifts a day because it's not required you can't squeeze it through the system and i think um in addition to that one of those partners who will remain nameless has publicly said on numerous occasions that they will expand their output to such an extent that they will take up 50 percent of all new global demand now that operation is decorporatising that's going to a joint venture and if one partner takes 50 percent of all new demand how much does the other partner take when it's a 50 50 joint venture that's pretty easy they take the other 50 percent so there's there's a lot out there and do we need to add to it the answer is at the moment i believe no does that mean we don't need the juniors the answer that clearly is also also no because long term it's the juniors that produce all of the new opportunities the large companies don't do it no i guess the lithium market as has been said is actually a very small market in terms of total cash generated and it's not the normal modus operandi for a large company so it's not going to attract the anglos the bhp's we are probably an exception because of the the deposit that they've got in Serbia but that aside it's not the sort of industry that does attract those large companies and as a consequence that creates the niche for the juniors team yeah a few a few comments i mean one the financial markets are different since 2008 the world's changed and and we had a little bit of an echo situation between 2009 to 2012 the reality is that in general though the you know the the lawyer in Zurich or the doctor in london who would take out a mortgage in his house for half a million and put it into junior expiration because he'd make the spread between the more that doesn't happen anymore the money's gone and so you know the liquidity that was available for speculative play as a small portion of a larger portfolio of the world's investment appetite that's gone the world's completely different than it was not that long ago i mean all you got to do is look at how many you know look at all of the investment banks they're all downsizing because it's just that market doesn't exist anymore as far as the need for juniors you know there's definitely need for what what everyone in the industry fears is someone going out there raising a lot of money being really well promoted and then blowing up because that will discredit everyone else that's what i think we all are nervous about because the access to capital for no reason for no fault of our own will then you know basically dry up or be much more restricted but but barring that you know at the end of the day the reality is it's not 2007 anymore you know and as far as as you know the supply and demand situation everything else i have i used to be an equity analyst for many many years and i remember you know you would look at things and you'd be told a certain story and then you'd ask yourself questions where the answers didn't make any sense which meant that you're underlying assumptions that were probably wrong green bushes is 40 percent of the world's production right uh green bushes cash cost is a little over four thousand dollars a ton of lcd right what's lithium trading at nowadays even if we include they're going to block it in the long term prices and everything else significantly above four thousand dollars a ton so the question i ask myself is as far as i know everyone likes making money so are they not ramping up because it's some grand master plan that it doesn't make sense to me which which leads me to believe that they're not ramping up to the you know they haven't done it as fast as they could because they can't i think there's something there that that we don't know about because it doesn't make sense for me that if they're cash costs of four thousand dollars a ton lce and lce is trading at multiples of that that they're not going to eat into that and make money you raised a good point though that goes far beyond the the space of just lithium and that is there is a different scenario now there's a different landscape out there not just for lithium juniors but for all specialty metal companies and even beyond specialty metals into a in gold and other minerals that a certain category of investor has been either vaporized or retired or died or traumatized and they're no longer with us so we um we're now dependent upon a market that's um where where's the money going to come from to fund these juniors it's the same people it's just that whereas before maybe you had a roll of decks of a thousand now it's a roll of decks of two hundred you know uh it used to be you know you have multiple multiple mid tier investment banks with a desk of people running around on the phone raising they're all gone they're all gone i mean look go look at you know particularly in london i have a lot more experience in london in terms of those desks they're gone and you look in canada you know the the acquisitions the mergers that have been happening everything else has basically raised the the floor of a size of a deal that is now acceptable to a bank is a lot higher than it used to be because of the mergers and acquisitions in the banking industry so uh yeah it's a it's a different world i mean it's a completely different world let's not fool ourselves so um do we have any questions for our panelists on that on these two subjects of um m&a in the lithium space and um and uh which way the lithium explorers are going to go there's a question down there at the back i'm going to get right back over to you bob i just want to ask you christopher can you confirm was this a statement or a question tesla is relying on the power of prayer to secure uh their lithium yeah that's a statement one of the opening uh panelists has suggested that the conversion capacity is the bottleneck not the raw material or not access to the raw material i just wanted we can get a bit more color on that as to okay how much is the curve version capacity bottleneck is at 50 percent and how long would it take and i assume the bottleneck is in china maybe again how long to fix that up yeah let me say firstly that the only conversion capacity at the moment is in china um so it and really there aren't that many concentrate producers around the world at the moment that there are more coming on stream of course uh and i think china has the ability to build uh a new converter in about 18 months they're very quick at doing the year the construction work and they've they've dealt with the technology for a long period of time uh with respect to uh how much conversion capacity have they gotten how much does it constrain the market to some extent it depends on the the quality of the material that they feed um in that they have to downgrade capacity to some extent for uh concentrates that come from certain sources or have certain physical characteristics so most of the capacity is used but what's its utilization it's probably about 60 of what it was designed for simply because of the nature of the material but be that as it may most of it is being used um with respect to where the additional material may come from uh to fill capacity or generate new capacity uh i think we're looking at uh and i did mention the the decorporatization of uh green bushes and it's interesting because it's not a reporting entity anymore it's a little bit difficult to get information but uh we hear a lot on the local scene in western australia with respect to that and other operations and i think it's fair to say that they've started the increase in capacity as a consequence of tianchi building their lithium hydroxide plant uh at konana just south of perth that will be followed by albermal doing the same thing that looks like a doubling of capacity uh and if rumours are to have it right uh there's a lot more on the drawing boards perhaps uh there are people already to put the nuts and bolts together on the second expansion uh so there's a lot there and then the other producers coming on stream in western australia uh of course there's uh uh chris reeds material coming out of mount marion which has been very successful and really at the moment hasn't had a market impact because it's so new uh same applies to galaxy and pilbra and we have mineral resources doing almost the unthinkable and shipping so-called direct shipping or at 1.2 percent into china in vast quantities at the moment uh so there is plenty of capacity around and it will fill up the any surplus in those convert converters if they can squeeze more through but that's an interesting point you raised there because it sounds if the bottle necking was the bottleneck was in china before now some of the new plants have been built outside china solved that problem oh yeah and i think to some extent that's tax driven because of the uh the impulse put on uh chinese producers exporting lithium chemicals from china for the rest of the world and that impulse is pretty high and so if you can build a chinese plant outside china which tianchi are doing the qunana uh and sell into say korea japan uh north america wherever it may be but sell into a destination outside china uh you increase your profit margin enormously so it's not surprising that they're doing that more questions any other questions observations well i want to ask adrian a question adrian um you know lithium australia is really frankly one of the leaders for uh acquisitions for junior lithium exploration place on the planet can you tell me what we should anticipate as shareholders say in the next couple of quarters we're going to continue this uh aggressive strategy can you comment well yeah there are a number of facets facets to that and we have at the moment i think uh several projects in western australia one in northern territory three in queensland two in south australia uh one in mexico one in germany and six in canada so it's a fairly hefty portfolio most of that has been done by uh joint ventures and various types of agreements with with other parties we currently have a takeover bit on the table for uh lopitico which is another perth based company primarily technology organizer i i i want to see all the technology and to get back to the earlier panel i want to see all that technology under one roof so we no longer have just the first and second best we have one two and three so look forward to more on the the merger front there with respect to the the exploration we're currently drilling in uh mexico and that's on a lithium so-called clay deposit and for the geologists or technologists in the audience may i say that clays ain't clays necessarily and we don't quite know what the lithium's in but it's not in clay in the most part so they're interesting deposits and we're looking for a technical solution that's capable of processing those at lower cost and i think within the next few months subject to some changes in the the mining war in germany will start drilling there as well i'd like to thank our panelists for participating here today and um look forward to doing the individual presentations later on thank you