Don Smith: on lithium, copper, and the ‘Gollum effect’

This article is a sponsored feature from partner Tempest Minerals Ltd. It is not financial advice. Talk to a registered financial expert before making investment decisions.

Warren Buffett said it first. Or maybe he said it best. Either way, there is truth in the idea that investing in business is, at the heart of things, investing in people. Indeed, what is a multi-million-ounce gold deposit without the human brains necessary to mine it? How would that deposit have been found without the niche skills of an expert few? 

In a market where the median Australian share portfolio is worth $170,000, it helps to know what — or who — we’re putting our money behind.

Who, then, is Don Smith? Managing Director of Tempest Minerals (ASX:TEM) — sure. But to stop there would be to accept a poor examination of a man who has some interesting thoughts about mining and exploration.

Introduction to Geology

The first thing to know is that mining is in his blood. Born in New South Wales, Smith grew up there and in Queensland around the exploration and mining projects at which his parents worked.

A sportsman like his father, he did martial arts and played rugby league — “I played pretty much every sport and enjoyed them all” — but, interestingly, had no inclination to follow his parents.

In fact, “I was pretty much forbidden by my parents to follow in their footsteps because they had to work so hard, and I don’t think they wanted me to repeat that,” Smith says.

“I had originally enrolled to do languages at university, but when I went there, I — by coincidence — ended up in an Introduction to Geology lecture and decided that was what I wanted to do.”

Since then, Smith has racked up stints with CBH Resources, Platypus Resources, Alderan Resources, and a host of others, gathering some compelling insights along the way and holding them for effective use at Tempest.

Mining, exploration and the ‘Gollum effect’

Over the course of his 20-year career, Smith has had plenty of time to ponder the nature of the industry. Asked how he might characterise his own approach to mining and exploration, he starts by citing a curious kind of disparity.

“You have ‘mine geologists’ and then you have ‘exploration geologists’, and never the two shall meet, according to some people,” Smith says.

“Mining geologists often end up getting too involved with the actual mining part and forget the geology part, and get too rigorously stuck in processes and that kind of stuff. Whereas exploration geologists often live in complete chaos with little structure and planning, and not much reality-based information going into what they’re exploring for.”

You have ‘mine geologists’ and then you have ‘exploration geologists’, and never the two shall meet, according to some people”

It was his time at CBH Resources, in particular, that taught Smith the importance of generalism — that there really is only one kind of geologist, with skills that are both transferable and complementary.

“There is a need for extreme-niche people in every discipline in the world, but unless you’re in the top 0.1% of an occupation, it’s better to be — especially in the modern world where technology is changing so rapidly — it’s better to be a generalist, to be good at a bunch of things so you can ensure you stay relevant,” he explains.

“My approach to exploration and mining is to do exactly that — integrate all the data and the ways that people work together.”

it’s better to be a generalist”

Speaking more broadly, Smith says one of the issues currently faced by the industry generally is what he calls the “Gollum effect”.

“Everyone basically goes around and gets little parcels of land and doesn’t share the information, doesn’t work with their neighbours, because it’s ‘my precious’ and they don’t want to lose something,” he explains.

“The truth is, in the exploration game, someone making a discovery beside you, or nearby to you, is the greatest value-add that you can give to the company without spending any money.”

A healthy dose of “coopetition” might be the answer, Smith adds. In any case, the Gollum problem is one that needs addressing — be it with technology or regulation — since the rate of discovery in Australia and around the world appears to be “dropping precipitously”.

Beware the lithium mania

It’s perhaps because of his preference for generalism that Smith is wary of trends. The current brouhaha over lithium, for example, is something he views as “completely manic”.

“Tempest was originally a lithium company, so I’m not speaking from cynicism here — or not complete cynicism. Lithium is still core to our story,” he says.

“It’s not something we’re jumping exclusively into, is what I’m getting at. Everyone should keep doing the work, but maybe there are a few stories out there that are maybe a little bit on the bubble-ish side.”

Part of the problem could be — once again —  a sense of prevailing disparity. 

“I just don’t think the world has a solid grip on the lithium space. There are a lot of rubbery numbers going around,” Smith explains.

“One financial group will say there’s an X-billion-tonne requirement for lithium in the next 5 years, and then the next group will say it’s a quarter of that, or 5 times that. There’s not a lot of agreement in those numbers, so I’m not sure the demand and supply is that well known.”

“I just don’t think the world has a solid grip on the lithium space”

Last year, New York-based investment bank Goldman Sachs made headlines when it predicted a tumble in lithium carbonate prices to US$53,300 a tonne in 2023 before collapsing to US$11,000 a tonne in 2024.

That assessment was in stark contrast to consensus targets at the time, which saw prices hovering around US$29,063 a tonne next year.

Macquarie Research, on the other hand, was particularly bullish, anticipating lithium carbonate would reach US$62,586 a tonne in financial 2023 before hitting US$72,500 a tonne in financial 2024.

The copper conundrum

If the lithium business is, in fact, a little on the crazy side, then “the copper thing is completely terrifying”.

“Even conservative estimates say we need to find a Chuquicamata — one the biggest copper deposits in the world — basically every year, just to keep up with the conservative requirements for copper,” Smith says.

“No one has made a serious copper discovery in a very long time, in terms of that scale, so the supply and demand in the market is definitely out of whack on that one.”

Even conservative estimates say we need to find a Chuquicamata — one the biggest copper deposits in the world — basically every year”

Earlier this year, consulting firm McKinsey & Company published a report predicting annual copper demand would hit 36.6 million tonnes by 2031. But even with the influence of new projects, restarted operations and recycling, the best we can hope for is 30.1 million tonnes — a roughly 20% shortfall.

Then again, perhaps there is a lithium-esque kind of disconnect. At the start of October, the International Copper Study Group forecast a production surplus in 2024 of 467,000 tonnes, an upgrade from its previous estimate of 297,000 tonnes in April. But the ICSG also warned that such forecasts are snapshots in time, and that “actual market balance outcomes have on recent occasions deviated from ICSG market balance forecasts due to unforeseen developments”.

In the end, no one really knows what the future holds. Anyone who professes the infallibility of their soothsaying is either a fraud or an idiot, or both. But instinct and inclination do exist, and some are closer to the truth than others. Which makes discerning investments in companies — and, by extension, the people running them — all the more important.

Write to Oliver Gray at

Images: Tempest Minerals
Author Image
Written By Oliver Gray
Originally from Perth, Oliver has a keen interest long-form journalism. He has written for a number of publications and was most recently Contributing Editor of The Market Herald’s opinion section, Art of the Essay.