MoneyTalks: Lithium supply crunch to feature prominently in 2022 – here are 3 stock picks
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MoneyTalks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.
Today we hear from Eley Griffiths Group portfolio manager Tim Serjeant.
Serjeant says the lithium sector remains particularly interesting, with the sector having dominated the top performers in 2021.
“It continued its strong run early into January and despite the broader market correction, the lithium sector has been one of the relative out-performers.
“At the same time the benchmark commodity price is breaking to new highs.
“Australia’s hard rock lithium miners typically produce spodumene concentrate which is then converted into high-purity products like lithium carbonate,” he said.
“The China benchmark lithium carbonate price recently hit a new high of 375,000 RMB/tonne (~US$50k/t).
“At the same time EV sales globally grew by
more than 100% to ~6.2m units in 2021 and pure battery electric car sales finally overtook diesel cars in Europe in December last year."
Serjeant said more than a fifth of new cars sold across 18 European markets were electric and EV sales in China alone jumped 160% to a record 3.3m units last year.
“Supply continues to lag burgeoning demand as Tesla highlighted in its most recently quarterly result and Tesla expects supply of battery materials to be the key limiting factor in its ability to launch new models in 2022.
“We are also seeing more evidence of downstream players (like battery manufacturers and auto OEMs) scrambling to secure future supply via off-take arrangements with the lithium miners.
“We expect this dynamic to feature prominently in 2022.”
As Stockhead writer Emma Davies put it last week, lithium is in a ‘party market’ and it looks like deficits will be hanging around til 2030 when supply catches up to fill the gap.
It’s simply a case of ‘right place, right time’ for PLS, Serjeant said.
“It’s the only independent source of spodumene concentrate globally right now with pure leverage to record prices and its asset base is strategic and inherently scalable as market demand continues to grow.”
LTR is developing the Kathleen Valley Spodumene project in Western Australia, which is one of the largest undeveloped spodumene resources globally with its recent DFS confirming an estimated production of 500ktpa.
“LTR is also evaluating the prospect of going ‘downstream’, by developing a lithium hydroxide plant in Western Australia.
“The company recently entered into a maiden off-take agreement with South Korean-based LG Energy Solutions (LGES), a leading EV battery supplier, for ~1/3 of its proposed spodumene production.”
CXO is building the Finniss Lithium project in the Northern Territory.
The project is fully funded, with plans to commission to the 174ktpa Spodumene Concentrate Operation in the second half of 2022.
“It is one of the few new sources of spodumene concentrate globally, and with supply remaining tight, Core Lithium is well positioned to capitalise on the current high pricing environment,” he said.
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