EXCLUSIVE: China-Linked Lithium Volatility A Headache For Producers But A Win For Retail Investors, Says Industry CEO

WASHINGTON — Volatility in lithium pricing in China is helping attract retail-level investors to mining companies in the battery metal's industry, Patriot Battery Metals PMETF CEO Ken Brinsden said at a mining conference this month.

One of the reasons for volatility in the lithium market is the pricing system in China, Brinsden told Benzinga on the sidelines of a recent Benchmark Mineral Intelligence battery metals conference in Washington, D.C.

The Asian nation—which is the world's biggest lithium buyer—has built up an extensive battery supply chain that includes products ranging from low-quality toy batteries to high-end electric vehicle batteries, he said.

That means the supply chain in China can absorb lithium in widely different states, allowing companies there to buy “anything at any time at any grade.”

Also Read: EXCLUSIVE: Major Automakers Target Lithium Supply From American Battery Technology Co.

That makes Chinese buyers more sensitive about price than quality, fostering transactions based on the spot market, he said.

"With that comes a whole heap of volatility," he said.

Retail investors like the volatility in critical minerals stocks more than their institutional counterparts, he said.

In Australia, where Brinsden-led lithium miner Pilbara Minerals Ltd. PILBF, retail investors were the first movers in the lithium space, he said.

While the lithium price fluctuations that trickle through to producers' stocks can be beneficial to day traders, Brinsden said the commodity's volatility is a significant complication for lithium producers as the risk increases the cost of capital, he said.

Meanwhile, South Korean and Japanese lithium buyers are more sensitive to quality and tend to purchase the metal under long-term contracts, creating more price stability, he said.

That volatility might lessen as the market becomes more sophisticated in its pricing, he said.

In the meantime, the ups and downs in the commodity and related movement in stocks mean critical minerals companies may be more attractive to retail investors than institutional investors, at least until the industry outside of China matures.

For Patriot's part, Brinsden is leading the development of the company's flagship Corvette hard-rock lithium property in Quebec, Canada. The company says it holds the largest resource of its type in the Americas and one of the 10 biggest in the world, based on contained lithium carbonate equivalent.

"It's akin to the largest mines in Western Australia," he said. "There's the chance that there's going to be a lot more mineralization."

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