Ann: March 2024 Quarterly Activities Presentation, page-49

Whenever I do something that isn’t “first principle” to me, whether it’s investing or plumbing, I try to apply advice from people that are either true experts in the field or people that are smarter than I am. It happens that when it comes to investing, I have little respect for several of the “big names,” but I do believe that, based on track record, Warren Buffett and Charlie Munger have the best track record out there, and they’ve done it for more than 50 years, so I try to apply their principles when I’m thinking things out.

If you think that those two gentlemen know/knew what they are/were doing in the investment realm, as I do, here is why I think PLS is an absolute no-brainer of an investment:

1. Lithium is a proven, existing technology that I understand (never invest in something that you don’t understand). I’m not arrogant enough to think that a new technology can’t pop-up and replace Lithium (I CAN BE arrogant, but not THAT arrogant). It happens that physics, up to a point, is first principle for me, I understand the chemical and physical properties of the periodic table, and unless someone can figure out how to use hydrogen or helium for battery technology, lithium is the best option out there.

2. Lithium demand is due to grow by 23% per annum for the next six years, even by the poorest of estimates. I’ve seen some estimates that are higher than that (most of the 23-27% estimates only take into account the EV industry, and don’t take into account ESS, nuclear and small batteries…think power tools, gardening equipment, et al). Always invest in stocks with anexcellent growth rate.

3. Invest in companies that have a durable competitiveadvantage and an excellent brand. In the lithium industry, it’s hard to imagine a lithium mining company that is ahead of PLS, in this respect. Greenbushes has a lower cost of production, but ALB, especially, has no idea what they’re doing (great thinkers, but piss poor miners), and IGO is really a nickel mining company that made a good investment, and is great at cashing dividend checks, but they don’t really add much, management-wise. LTR (which, full disclosure, I also own) MIGHT be able to compete with PLS, eventually. They have reasonably good management and an excellent ore source, but they’re YEARS behind PLS, and have nowhere near the resource (size-wise) that PLS does.

4. Management is the most important aspect of acompany. Dale, et al, are THE BEST management team in the industry. I respect LTR, Ganfeng and a few other firms’ management teams, but PLS seems to have the best management team out there. As much as I wanted a dividend, NOT paying the $0.03 we were due, for 1H24, was the tough but smart decision. We have multiple deals that other miners can only dream of (POSCO JV, Calix JV, now the Ganfeng studies). Most importantly, and this is where management makes the biggest difference of all, we’ve nearly completed P680, on time and on budget. P1000 is progressing, on time and on budget, as is the Calix JV. The POSCO JV actually brought Train 1 in ahead of time and just a bit UNDER budget, and is on time with Train 2 (we’ll see how budget goes). They’ve shown financial discipline and they’ve managed to bring in multiple large projects in on time and on budget. That’s the essence of good management.

5. Our favorite holding period is forever. See my postscript, below.

The final Buffett/Munger principle that I try to adhere to is, “befearful when others are greedy and greedy when others are fearful,” which has also been expressed by Mr. Buffett and others as, “buywhen there’s blood in the streets.” I dipped a toe into both PLS and LTR at prices that I expected would see me at a loss for a while (even those shares will eventually be profitable), but I am hoovering-up shares of both companies, and have been for the past six months. I have a firm rule that I never invest more than 20% of my assets in one asset, and have been tempted to violate that rule for PLS, the past few months. I haven’t, yet, but I have decided that for the rest of the year, as long as the price of PLS remains below $4.25, I am investing all of my investable income for the remainder of the year in PLS/LTR (2:1), unless an obvious better investment reveals itself to me.

As a postscript to my now Tolstoy-like post, the Hartford Funds did a study only a few years ago and found that if you had missed the ten best trading days, over the past THIRTY YEARS, your return would have been cut in half, and if you missed the 30 best trading days over 30 years, your return would have been cut by “an astonishing 83%.” Timing the market is a sucker’s bet. Buy excellent firms at a fair price, load-up when the price is ridiculously low, and then stick to your guns, unless there is a truly fundamental change to your investment thesis. If I want to “play the market,” which I do, occasionally, I use call and put options, and I only allocate 5% of my investment egg for that.

For all those reasons, I agree with you that PLS is one of the best places to apply my money.

Best regards, and good health and luck to all!