Penn Wealth Publishing

2019.09.15 Penn Wealth Report Vol 7 Issue 04

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10 penn wealth Report volume 7 iSSue 04 15 Sep 2019 Penn Wealth Report Copyright 2019. All Rights Reserved. inveStment intelligence Livent Corp Metals & Mining e content of this report reflects the personal views, opinions, and research of Penn Wealth Publishing. While measures are taken to help assure the accuracy of data, no guarantees can be made and the firm is not liable for any losses incurred by subscribers. is is not a solicitation to buy. Always consult your investment profes- sional before investing any money. The US-China trade war and global eco- nomic slowdown have combined to beat down a number of sectors and industries, but few corners of the market have been hit harder than commodities. Specifically, the raw materials needed to build things. One of those raw materials is lithium, a critical component in a number of high-tech applications, including: renewable energy storage, electric vehicle batteries, defense and aerospace products, and smartphone batteries. What makes lithium so valuable to high-tech manufacturing? With the atomic number 3, it is nature's lightest metal and lightest solid element, not to mention one of the most chemically-re- active materials. is remarkable element also has the highest electric output per unit weight of any battery material. ere are two pri- mary methods for extracting lithium from the ground: from brine deposits in evaporated salt lakes, and hard-rock mining. One of the top lithium producers in the world is Livent Corp (LTHM $5-$6- $20), a $1 billion US-based miner which was recently spun- off from FMC Corp (FMC). A geographic region in Latin America known as the "Lithium Triangle" holds the mother lode of the ele- ment, with 70% of known global reserves. e Salar del Hombre Muerto—a salt pan in Argentina squarely located in the Lithium Triangle—is one of the world's pur- est sources of lithium brine. Not only does Livent operate a production facility in this area located high in the Andes, it has plans to increase the facility's output from 21,000 metric tons today to 60,000 metric tons by 2025. is brine extraction produces a sub- stance known as lithium carbonate, which currently sells for roughly $10,000 per ton. While this price has been halved over the past few years due to demand destruction, lithium demand is expected to trough soon and nearly triple by 2025. New developments in battery technology are changing the dynamic for lithium. While lithium carbonate still accounts for around 60% of demand, lithium hydroxide is slowly but surely becoming the more sought-after commodity. is variant is produced either from hard-rock extraction (spodumene mining) or by add- ing additional steps to the carbonate process. Livent only under- takes the second (more costly) method, and expects its hydroxide production to increase from 20,000 tons today to 30,000 tons by 2025. Financials. In 2018, Livent had revenues of $442.5M, up 27% from 2017's $347.4M, which was a 32% increase over 2016's $264.1M. e company's net prof- its have remained in the green over the past three years, with last year's $126.1M representing a 200% increase from 2017. Insider trading can offer signs into where a company might be headed. After all, these are the people who know intimately what is going on behind closed doors. Over the past 9-12 months, four top members of manage- ment have purchased 77,500 shares valued at $1.3M, with no share sales on record. Our initial target price for LTHM is $10/share. Lithium prices have been halved over the past several years due to demand destruction. We believe that trend is about to reverse. ...Insider trading can offer signs into where a company might be headed. After all, these are the people who know intimately what is going on behind closed doors. Salar del Hombre Muerto, salt pan of the dead man, source of the purest lithium brine

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