Belles of the ball: Four lithium stocks power into S&P/ASX 300
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Four lithium stocks were standout additions to the S&P/ASX 300 in March as the all important index had its first re-balance for the 2022 calendar year.
Lithium carbonate prices rose to $US63,900 in February, a massive gain of more than 450% for the year.
Lithium prices continued to break records in March, and investors wanted a piece of the action. Near term producers AVZ Minerals (ASX:AVZ), Core Lithium (ASX:CXO), Lake Resources (ASX:LKE), and Sayona Mining (ASX:SYA) were all beneficiaries.
The S&P/AXS 300 is re-balanced semi-annually, in March and September and is a significant index used as a cutoff for investments by many fund managers and investors. Entering the index can be a major milestone for companies, signifying they have entered the major league and further boosting share prices.
ETF Securities head of distribution Kanish Chugh said is was not s shock to see lithium stocks as the standout addition to the latest revision of the S&P/ASX300.
“That lithium stocks have stormed into the major Aussie share market gauge is unsurprising,” Chugh said.
“Demand for lithium is surging, as the world embraces battery technology and electric cars to see off the threat of global warming.”
But with the benchmark being only revised on twice a year, Chugh thinks the S&P/ASX 300 was late to the ball.
“That lithium producers are only getting included in the ASX 300 at this late stage reflects a weakness in popular ‘core’ benchmarks like the ASX 300,” he said.
“Namely, these benchmarks can be too slow to react to megatrends, like decarbonisation, and only include exciting new companies once most of their growth is priced in.
“We saw something similar with Tesla and its late inclusion in the S&P 500 in 2020, at which point it was already one of the largest companies in the world.”
So, what’s the rundown on the lithium stocks who now find themselves on the S&P/ASX300?
Sayona owns advanced exploration assets in Canada’s Quebec province, where it recently announced a doubling of the Authier and North American Lithium projects’ combined resource to 119.1 Mt at 1.05% Li2O at the start of March.
The companies share price has risen ~660% in the past year to ~30 cents and it now has a market cap of ~$2.09 billion.
AVZ Minerals is the majority owner of the Manono Lithium and Tin Project in the Democratic Republic of Congo, which contains one of the largest and highest-grade undeveloped hardrock lithium resources in the world.
The project developer’s share price has risen ~460% in the past year to $1.05 and its market cap is now ~$3.87 billion.
Australia’s next lithium producer Core Lithium is one of the most popular domestic companies traded on online trading platform Selfwealth.
Development of Core Lithium’s Finniss Lithium Project in the NT continues to run according to schedule, with establishment of access roads and water pipelines, while water management infrastructure, administration areas and communication facilities well advanced.
The Core Lithium share price has also seen a massive 439% increase in the past year to ~1.30 and now has a market cap of $2.22 billion.
Also a hot stock traded on the Selfwealth platform is Lake Resources. Lake plans to use direct extraction technology (DLE) for development of sustainable, high purity lithium from its flagship Kachi Project, as well as three other lithium brine projects in Argentina.
The projects cover 200 sq km in a prime location within the Lithium Triangle, where 40% of the world’s lithium is produced at the lowest cost.
With its share price having risen ~587% in the past 12 months to $2. Lake Resources now has a market cap of ~$2.54 billion.
Gold miner and lithium developer Firefinch Resources (ASX:FFX) also found itself elevated to the S&P/ASX300.
Firefinch recently surged after announcing the receipt of US$130m in cash from Ganfeng to formalise a joint venture to develop the Goulamina lithium project in Mali.
Ganfeng is a leading supplier of lithium to top tier battery producers and car makers such as BMW, LG Chem and Tesla. Goulamina is expected to be one of the largest hard rock lithium projects in the world, with Stage 2 expansion expected to take its production profile up to an enormous 880,000tpa.
Firefinch is demerging the Mali lithium project into a separate ASX entity to be called Leo Lithium.
Former Galaxy Resources managing director Simon Hay has been appointed the new Leo Lithium boss. Firefinch shareholders will receive shares in Leo via an in-specie distribution with the parent company retaining a 20% stake in the new entity.
The spin-out leaves Firefinch to focus on development of its 80% owned Morila gold project, also in Mali.
Firefinch has been a big mover in terms of ASX lithium and gold stocks over the past year. It’s share price has risen ~356% to $1.05 and it now has a market cap of $1.24 billion.
Graphite producer Syrah Resources (ASX:SYR) — which has struck a landmark offtake deal with EV giant Tesla — also made it onto the S&P/ASX300 list.
Syrah, which also owns the Balama graphite mine in Mozambique, will send around 8000t a year to Elon Musk and Co, conditional on final specifications of the AAM product being provided by the end of this year.
Syrah is currently undertaking a $250 million capital raise after announcing the expansion of its Vidalia active anode materials plant in Louisiana.
The decision to construct the full scale 11,250tpa plant in the Bayou comes after its deal with Tesla. The full underwritten institutional placement and 1 for 5.9 non-renounceable entitlement offer will raise around US$178m ($250m)
Graphite missed the charge in battery metals prices last year that saw lithium prices skyrocket. However, according to Benchmark Mineral Intelligence’s graphite index are up 22% over the past year.
The Syrah share price is up ~50% in the past year to ~$1.60. The company now has a market cap of ~$1.07 billion.
Green cement technology company include Calix (ASX:CXL), which has seen its share price soar ~241% in the past year to $7.77 with a market cap of $1.25 billion, is also now on the S&P/ASX300 index.
Calix has a technology it calls Project LEILAC (Low Emissions Intensity Lime and Cement), which reduces carbon dioxide emissions from cement.
Cobalt project developer Jervois Mining (ASX:JRV) has grown to be an addition on the S&P/ASX 300. Cobalt has a wide range of uses including in batteries and in electroplating. It is used in alloys for aircraft engine parts and allows with corrosion/wear resistant uses.
Supply side additions are forecast to struggle to keep pace with such growth, providing further support to prices.
Jervois is developing a fully-integrated cobalt value chain and on track to become the only cobalt mine in the US. It share price has climbed ~90% in the past year to 88 cents and it has a market cap of $1.32 billion.
There were also notable removals from the S&P/ASX300. While many lithium stocks found themselves added to the index developer Piedmont Lithium (ASX:PLL) was removed.
Piedmont has been operating in the US and positioning itself as a supplier into the local lithium supply chain.
Its share price has not risen as strongly as lithium stocks in the past year, up ~56% to 90 cents with a market cap of $1.54 billion.
Mt Gibson Iron (ASX:MGX) has fallen off the S&P/ASX 300. The company in October 2021 announced plans to suspend its new Shine mine in WA’s Mid West, amid then falling iron prices and higher freight charges.
At the time Mt Gibson Iron managing director Peter Kerr said the company had to respond to ‘deteriorating market conditions’, which have come about amid a big drop in steel production enforced by the Chinese Government.
But could Mt Gibson capitalise on the latest iron ore boom? Russia’s invasion of Ukraine and signs of new stimulus spending from the Chinese government have been sending iron ore prices higher in recent times.
The price of iron ore is now ~$160 per tonne. The Mt Gibson share price has fallen ~28% in the past year to 62 cents with a market cap now of ~$744.5 million.
Mining equipment maker Emeco Holdings (ASX:EHL) was another major mining player to find itself booted from the S&P/ASX300 index after its share price fell ~15% in the past year to 82 cents.
It’s a case of good news and bad news for Emeco. The company delivered revenue of $373m for Q1 FY22, 16% higher from the previous half and 25% higher on pcp. Emeco has announced a full year FY22 operating EBITDA guidance of $250 to $260m.
The company’s market cap is now ~$437 million.