You're getting closer ...
And they're still angling. ... expand existing WA operations or a bit of M&A?
www.mining.com
www.marketindex.com.au
Not sure about the value of Lithium miners because supply is plentiful however it is refined lithium that makes the money. Refiners are making the big bucks and most are in China. I invested in this company https://energyx.com/ who will do another round soon because they have a process to refine it much faster and at much lower cost that they developed after proving prototypes in the field. They have over 60 patents and will sell their technology to refiners. Their videos are compelling and I listened to a long interview with the founder which impressed me. Elon Musk has broken ground on his own refining plant in the US so that might supply his needs.
stockhead.com.au
MickLithium carbonate pricing is another, given that the metal is one of the core components of the lithium-ion batteries used in most EVs – nickel-hydride batteries are often used in hybrid vehicles.
Demand for EVs is ramping up strongly – as is the demand for lithium, which is also a key element in several other applications, including renewable energy production and storage batteries.
So, why are lithium prices down 40% since last November? Back then, the commodity was trading above US$86,100 per tonne, this figure is now US$47,417, according to Trading View.
The prices of lithium spodumene – the most widely exploited mineral source of lithium – have risen from US$400 a tonne three years ago to a peak of around US$6,000, before pulling back to US$4,500.
Falling EV sales in China, combined with the Lunar New Year holiday, have driven the correction in lithium prices, as Goldman Sachs analyst Aditi Rai told Barron's last month.
Five-year lithium spodumene price
Lithium price (Chinese Yuan). Source: Trading Economics
“Chinese lithium prices took the staircase up but the elevator down,” wrote my Market Index colleague Kerry Sun recently in an article about battery metal stocks, referencing the work of investment bank Citi.
China is one of the world’s largest producers of lithium, alongside Australia, and Chile.
Australian production comprises around 50% of the world’s total lithium output. Allkem (ASX: AKE) and Pilbara Minerals (ASX: PLS) are among the best-known large-cap stocks on the ASX. Allkem’s share price has fallen 7.65% in 2023 so far, while Pilbara shares are down 4.67% in the same period.
But there are many others producing lithium and other metals that are key to the manufacture of EV batteries. Two ASX juniors in the space are Core Lithium (ASX: CXO) and Liontown Resources (ASX: LTR).
Both missed consensus earnings expectations in the first half of FY2023, as we discussed recently with David Franklyn, who heads up the Argonaut Natural Resources Fund. He sums up their results like this:
CXO – “Wait and watch as Core enters the higher-risk commissioning phase.”
LTR – “Significant uplift in construction costs but on track for first production mid-2024.”
Why are investors now cautious on lithium?
In a word, 'price'. Franklyn notes (as pointed out above) lithium prices are down 46% in the past six months and 14% in the last week alone.
“This seems appropriate, given the weakening in the lithium price combined with more company-specific issues such as the total overhaul of its management team in the last year,” he says of CXO.
The company has replaced its managing director, chief operating officer and chief financial officer in this timeframe. It is also entering the higher-risk commissioning phase of its Finnis lithium mine in the Northern Territory.
“It also failed to conclude an offtake agreement with Tesla and operations have been negatively impacted by above-average rainfall,” Franklyn says.
And on LTR, he says the market was encouraged by management’s renewed commitment to producing its first lithium by mid-2024,
“But investors are wary of the weakening lithium price, and a capex funding gap of around $200 million due to the higher development cost and mine plan modifications,” Franklyn says.
“Like Core, it’s all about project delivery from here.”
He points out that LTR’s share price is down 15% over the past six months and 12% in a single week.
What are the recent surprises from CXO and LTR?
For CXO, it was the first shipment of 15,000 tonnes of direct shipping ore (DSO) to China just after the end of the half. (Note: This isn’t the main game of spodumene concentrate, which is set to see first production in the first half of calendar 2023).
Franklyn also cites the positive results of the company’s drilling program, with further scope to expand this beyond the initial target of 250,000 tonnes per annum.
Project funding shortfall
The first stage of LTR’s Kathleen Valley mine in Perth, Western Australia is expected to produce up to 550,000 tonnes of spodumene. This figure is set to lift to 770,000 tonnes in stage two.
“Major uncertainty is around development cost and how this will be funded,” says Franklyn.
“Available debt and equity capacity is currently $685 million, which is likely to see it short by around $200 million. Alternatives to close this gap include selling DSO, offtake prepayments, or increasing debt or equity.”
Buy, Hold or Sell?
Rating: Hold (for both)
Franklyn and his team currently rate Core Lithium and Liontown as HOLD. In the former, he notes the company retains about $125 million in cash and is closely watching the progress of its increased production of spodumene before reassessing this view.
It’s a similar story for Liontown: “We’ll watch for project progress and are also looking for clarity around additional funding.”
Outlook: “It’s time to deliver”
Emphasising his earlier remarks, Franklyn says it’s all about project delivery for both LTR and CXO.
In CXO’s case, he believes a re-rating would be in order if it can successfully commission the project on time, within the budget, and hit production targets.
At LTR, Franklyn is watching for more clarity about the effect of mine plan amendments and how management intends to close the capex funding gap – the latter point being critical.
Where are lithium prices headed?
“We expect further weakness in the spodumene price in the medium term, as it pulls back from extraordinarily high levels achieved in 2022,” Franklyn says.
“While this will no doubt have a negative impact on market sentiment towards the sector, the price is still very attractive and will deliver strong returns to scale producers.”
In the second half of 2022, EV demand slowed due to China's ending of subsidies to stimulate sales in the world's largest EV market. Then in the US, the world's second-largest EV market, Tesla began discounting vehicles in December.
Cobalt, another crucial component in batteries, has seen prices plummet by over 50%. Meanwhile, copper, a key metal in electric motors and batteries, has experienced an 18% decline.
BEIJING, March 31 (Reuters) - "China's top lithium producers agreed this week to set a floor price of 250,000 yuan ($36,380) per tonne of lithium carbonate, six people familiar with the matter said, in an effort to slow a plunge in the price of the battery raw material.
"The price was agreed on Tuesday by around 10 companies including Tianqi Lithium and Ganfeng Lithium that met on the sidelines of a conference in Nanchang in southern China, said one person who attended the meeting and five others briefed on the discussions...
Exclusive: Chinese lithium producers set price floor as demand evaporates, sources say
China's top lithium producers agreed this week to set a floor price of 250,000 yuan ($36,380) per tonne of lithium carbonate, six people familiar with the matter said, in an effort to slow a plunge in the price of the battery raw material.www.reuters.com
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