Kess Energy believes that the fall in lithium prices has presented opportunities for acquisition of rivals in what could be a period of consolidation.
The recent dramatic drop in lithium prices, declining 80% from their peak, has sparked concerns about the future of the lithium mining industry. However, Brasilia, Brazil-based lithium miner Kess Energy believes the sharply lower price of lithium presents unique opportunities for companies willing to use this time as an opportunity to make strategic acquisitions.
The company’s view is that buying rival lithium miners during a price slump can offer several benefits including the reduced cost of acquisition. Many smaller operators failed to hedge production and this has placed greater pressure on cash flow as revenues have been impacted, rendering them far more attractively valued.
Acquiring rivals during a slump represents a cheap way to significantly increase capacity at low cost before reaping the rewards when lithium prices return to healthier levels.
Kess Energy does not see the prospect of any meaningful decline in demand for lithium in the future given the growing adoption of electric vehicles and renewable energy projects in the years ahead.
Automakers like BYD, Ford and Tesla are taking advantage of lower lithium prices to bolster plans for new, more affordable models that are expected to spur wider adoption of EVs in markets around the world.
The company’s Chairman, Inato Ramirez explained, “Our decision to hedge production means we’ve seen minimal impact on revenues in the last year or so since the decline in prices started and, consequently, we’re well positioned to take advantage of the current situation to acquire rather than be acquired.”