RE:Number one pickI believe that article was from 2016 - if you look at the date under the author's picture. In any light - he is has been and continues to be an avid supporter of CRE.
On Nov 5 - he increased his target from 1.90 to $2.00 (see the bottom) just based on industry fundamentals - it was a report on a number of Battery Materials - below is an excerpt..
Battery Materials - upgrading lithium pricing
Lithium demand forecast revisions: Updated demand forecasts (average +8% p.a.
2017-2025) have resulted in modelled lithium demand increasing to 827kt LCE by 2025
from ~260kt in 2017, representing a 14.5% CAGR (from 13%). Specific revisions include
minor adjustments to modelled EV sales (YTD data suggests sales on track to record
+35% YoY growth in 2017; modelled penetration rate of 13% in 2025 unchanged), as
well as upward revisions to average battery size assumptions by 24% to 44kWh from
2020. The most material change to our forecasts is the incorporation of WIP (work in
progress) inventory (i.e., 1 year forward demand curve for Li-ion battery demand) to
account for supply chain lag (e.g., mine to market 9-12 months).
Increased demand expectations offset by larger supply response in 2019-2023: We
have made a number of revisions to our supply modelling which include 1) refinements
to near-term supply estimates, 2) refined project start ups/production ramp ups, and
3) incorporation of possible/probable expansions and new projects. We continue to
risk weight new market supply to account for uncertainties around project financing,
development and production delays (lithium projects have a well noted propensity to fall
short of expectations), and supply chain bottlenecks.
Lithium market to remain tight through 2018; upgrading lithium price forecasts:
We expect tight market conditions to persist through 2018 (and potentially into 2019
subject to success of new project ramp ups). We continue to anticipate a transient
market surplus from 2019/20-2023, before the deficits return in 2024. Based on our
updated demand assumptions, we estimate that by 2025 the lithium market will require
23 new projects with an average capacity of 25ktpa LCE (i.e. average 3 new projects per
year) in order to satisfy forecast demand. Revised pricing forecasts call for increases
of 16%/13% in 2018/2019 for lithium carbonate (min. 99% Li) to US$13,279/t and
US$12,659/t respectively. LT forecasts (2025) increase by 6% to US$11,806/t. Our
spodumene concentrate (6% Li2O) forecast revisions include a 13% increase to 2018
estimates to US$920/t, with LT increasing by 9% to US$749/t.
Target price & Rating changes:
We have revised valuations/target prices for our Global Battery Materials sector
coverage (see sidebar), with revised lithium price forecasts having the greatest impact on
producers/near-term producers. Rating changes include:
<<Note he talks about different materials - so I am just pasting the lithium section relevant to CRE>>
Battery Materials: SxD model revisions
sees increase in forecast lithium prices
LITHIUM
Demand – SxD model revisions
- Revisions to our model have resulted in our demand forecasts increasing by an average of 8% p.a. versus prior CGe from 2017-2025. We now forecast total lithium demand to increase by 234% from 2017 to 2025 to 872kt LCE, representing a CAGR of 14.5% (against prior CGe of 13%).
Specific model revisions include:
- Incorporation of WIP (work in progress) inventory build within the Li-ion battery supply chain to account for supply chain lag (i.e. mine to market of 9-12 months). In our view, adopting a forward (~1 year) demand curve more adequately captures market dynamics given the time lag between supply (i.e. reported mineral and/or chemical production) and demand (i.e. reported sale of electric vehicle/electronic device, etc.).
- Revisions to forecast EV sales in China for CY17 (-17% vs prior CGe to ~530k units) to reflect slower start to 2017 sales (owing to uncertainties around Government subsidies). Despite this, we anticipate China to accelerate in the 2H, with RoW data (Figure 2 below) suggesting the global EV market is on track to record another year of +35% volume growth (2016 ~780k units vs revised CGe 2017 forecasts of 1.1m units). We have made no change to EV penetration assumptions, which remain at 13% of global sales by 2025 (v CGe 1.5% in 2017).
- Upward revisions to average EV battery size assumptions from 2020 (+24% to 44kWh average across all passenger PHEV/BEV variants) to reflect expectations for continued reductions in average battery pack costs and moves by auto OEM’s to manufacture vehicles with longer AER’s (all -electric range)
Supply - SxD model revisions
- Revisions (in certain cases, figures are risk adjusted to account for uncertainty around financing, development and production delays, potential converter capacity bottlenecks, etc.) to our modelled market supply include:
- Minor refinements to 2017 estimated supply based on latest export data
- Refined project startups and production ramp up profiles for expected hard rock supply from Western Australia beginning 2018 (Pilgangoora [Altura Mining], Pilgangoora [Pilbara Minerals], Bald Hill)
- Incorporation of risk adjusted project expansions (Pilgangoora [Altura Mining], Pilgangoora [Pilbara Minerals])
- Probable/Possible supply from new projects (Wodgina, Mt Holland, Maricunga)
- Revised model assumptions see an average increase in modelled supply of 10% p.a. versus prior forecasts, with the largest increases in modelled supply anticipated commencing in 2021-2024.
Market balance & Pricing forecasts
- Our revised supply/demand forecasts are shown in Figure 6 below, with key conclusions including expectations of continued tight market conditions into 2018 and possibly into 2019 (subject to the success of commissioning and production ramp ups at Bald Hill and Pilgangoora [x2]).
- We continue to expect the market to move into a transient market surplus between 2019-2023 of between 4-18% – while we are now more bullish on demand, this is offset for the most part by the prospects of a number of large projects expected to come on line between 2020-2022. We anticipate that market surpluses will unwind through 2023, and by 2025, we estimate that the market will require 23 new projects at an average capacity of 25ktpa (~3 new projects per year) in order to satisfy our updated demand expectations.
- Our revised lithium pricing forecasts are shown in Figures 8 and 9 below. SxD model revisions have resulted in moderate upgrades to lithium carbonate (min 99% Li FOB) pricing assumptions in 2018/19 of 16% and 13% to US$13,279/t and US$12,659/t respectively. Our LT prices increase by 6% to US$11,806/t.
- Key changes to spodumene pricing (min 6% Li2 O) forecasts include a 13% increase prior CGe 2018 forecasts U$920/t, with our LT forecasts increasing by 9% to US$749/t.
Forecast Changes
COMPANY CODE ANALYST PRICE MKT CAP $m RATING NEW TP OLD TP % Chg
Critical Elements CRE.TSX EZ $1.77 C $263m SPEC BUY C$2.00 C$1.90 +5%