17 February 2022
By Mark Smith
The TB Amati Strategic Metals Fund has 41% portfolio exposure to battery metals, below is the price performance of the majority of those, rare earths and graphite have similar price charts.
The key takeaway is these markets are now SUPPLY driven not demand driven and there is a real squeeze in these metal markets.
The last time we saw evidence of supply driven metal markets were the platinum group metals back in 2006 resulting in 3 years of extreme price growth; the difference here is there is no real substitution of battery metals, just a change in the chemistries in the short to medium term.
Source: Asian Metal
The geographical supply of battery metals (especially Lithium) is expanding from the incumbent areas of Australia, China and Latin America to North America, Africa and Europe.
The Fund has invested in battery metal developers and near-term producers specifically in North America, Africa and Europe.
(Brazil, Ghana/Cote Ivoire, USA, Germany, Czech Republic, Scandinavia, Tanzania & Canada)
Source: Canaccord Genuity
China has been busy protecting its EV franchise
14 M&A deals were done in 2021 - 8 by China
Source: Company reports (Canaccord Genuity)
The TB Amati Strategic Metals Fund is well positioned for further M&A - why?
We have invested in companies from the emerging supply regions of the world with strategic deposits and no Chinese investment or JVs at this stage – well nearly all, Peak Rare Earths in Tanzania has just had 19.9% interest acquired by Shenghe Resources for a 24.5% premium to market. We own Peak at 3% of the fund.
There is further room to grow:
The market is pricing in $12,844/t chemical lithium in the producers vs. Spot of $56,000/t.
The market is pricing in $893/t spodumene (6% Li) versus spot of $2,700/t.
The 3 legs to the TB Amati Strategic Metals Fund stool remain intact:
Financial analysis and stock picking the resource equities in small and mid-cap.
Development and drill bit discovery from our mining and geological experience.
This article is a financial promotion issued by Amati Global Investors Limited, which is authorised and regulated by the Financial Conduct Authority. It is provided for informational purposes only and does not represent an offer or solicitation to buy or sell any securities. Nor does it provide you with all the facts that you need to make an informed decision about the merits or otherwise of this Fund. Please refer to the risk warning below.
Past performance is not a reliable guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amount they originally invested. The investments associated with this fund are concentrated in natural resources companies, which are subject to greater risk and volatility than companies held in other funds with investments across a range of industries and sectors. The return on investments in overseas markets may increase or decrease as a result of exchange rate movements. Shares in some of the underlying companies associated with the fund may be difficult to sell in a timely manner and at a reasonable price. In extreme circumstances this may affect the ability of the fund to meet redemption requests on demand.
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