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Bargain Barrel: Do these 7 advanced ASX lithium stocks have room to run?
Mining
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This lithium boom is a rising tide lifting all boats.
While the more speculative junior stocks have enjoyed some of the biggest % gains, miners are minting record profits. That means divvies.
Spodumene – sold to lithium chemical producers from hard rock mines in Australia by companies like Pilbara Minerals (ASX:PLS) and Allkem (ASX:AKE) – was trading at an average price of $US3,263 at the start of April.
That’s a gain of 504% over the past year, with more to come.
“Current pricing dynamics suggest a material step-up in spodumene concentrate pricing for offtake contract sales during the June Quarter,” PLS said April 12.
The company will provide further pricing guidance as part of the upcoming March Quarterly Report, to be released on 28 April.
Meanwhile, Allkem – the lithium beast formed via the merger of hard rock miner Galaxy Resources and brine producer Orocobre – is now negotiating pricing for US$5,000/t for the June quarter.
It expects to ship some 50,000t to customers in Asia. With some back of the envelope very much unofficial maths, that’s potentially $330 million ($US250m) in revenue at current exchange rates (though some will come off for things like shipping, tax and product grades).
For reference, Allkem made $192.1m in revenue in the entire first half of 2021 at both Mt Cattlin and its Olaroz project in Argentina – a record at the time.
With prices for lithium carbonate at Olaroz also rising from US$27,236/t (9% above guidance) in the March quarter to US$35,000/t in the June quarter on projected sales of 3500t, the second half is certain to blow that one out of the water.
Near-term miners next in line
The opportunity to mint cash is also why near-term miners have enjoyed huge gains over the past year, led by Lake Resources (ASX:LKE) (+3,228%) and Sayona Mining (ASX:SYA) (+3,600%).
Aspiring miners usually undertake four different types of studies to determine whether a project is economic.
These are scoping, preliminary feasibility (PFS) and definitive feasibility (DFS)/bankable feasibility (BFS).
Below, Stockhead has pulled out seven potential near-term miners (scoping level or better) under a $300m market cap, which, for whatever reason, have yet to run hard like Sayona or Lake.
Are these advanced lithium stocks undervalued?
LITHIUM POWER INTERNATIONAL (ASX:LPI)
Stage: DFS completed
Market cap: $290m
1 year return: +214%
The company wants to begin construction at the 51%-owned ‘Maricunga’ JV project in Chile later this year.
An updated definitive feasibility study, usually the most advanced of mining studies, envisaged average earnings before tax of $US324m from 15,200tpa of LCE production over 20 years.
An operating cost of $US3,718 per tonne could mean big profit margins at current lithium prices above $US60,000t.
The project will cost ~$US626m to build.
“Preliminary indications of interest” have been received for debt financing and future equity financing of the project, LPI says.
Final Investment Decision is expected for some time in 2022, it says, with construction to start immediately after.
Stage: Scoping Study completed
Market cap: $270m
1 year return: +48%
JRL’s 1.43 billion tonne ‘McDermitt’ project includes one the largest lithium deposits in the US.
While light on detail, a September 2021 scoping study – the first proper look at the economics of building a mine – “show a large and valuable project”, JRL says.
The company expects to publish an updated mineral resource for McDermitt in the current quarter and has planned a further drill program for the second half of the calendar year.
Stage: DFS completed
Market cap: $250m
1 year return: +100%
LPD wants to build a lithium mine and concentrator in Namibia, and a chemical conversion plant in Abu Dhabi.
In December, LPD signed a binding lithium hydroxide offtake agreement with commodity trading firm Traxys.
For LPD, this represents 100% of the production of lithium hydroxide over seven years from the company’s planned Phase 1 Project, which is due to fire up in 2023.
Phase 1 would cost $US139m to build and result in ~7,060tpa LCE production over 14 years.
A 2020 DFS estimated $US50m in annual free cash flow – but this was based on a long-term lithium price of just $US12,910/t.
Stage: PFS update completed
Market cap: $230m
1 year return: -10%
EMH’s ‘Cinovec’ project in Czech Republic (49% interest) is bigger than all other hard rock projects in the EU combined, it says.
The integrated mine and processing operation would produce 29,386tpa lithium hydroxide over 25 years at operating costs of $US5,567/t, according to a recent pre-feasibility study (PFS) update.
It would cost $US644m to build.
EHM is currently progressing strategic partner/offtake discussions “with leading global batteries/auto [makers]”.
Stage: DFS underway
Market cap: $140m
1 year return: +93%
ASN’s main game is the ‘Paradox’ lithium-bromine brines project in southern Utah, which could benefit from the Biden administration’s focus on building a local battery materials supply chain.
Recent testing suggests the quality of Anson’s lithium works better than the “commercially available Tier 1 products currently used in the production of high-performance lithium-ion batteries”, the explorer says.
A major JORC Resource expansion program is now underway to expand and upgrade the Paradox resource base.
ASN has a project-wide Exploration Target of 1,300 million tonnes to 1,800Mt grading 80 to 140ppm (parts per million) lithium and 2,000 to 3,000ppm bromine.
A DFS is also underway for a lithium production plant with a final total-installed cost estimate to enable “advancement to final design and construction phases”.
Stage: DFS underway
Market cap: $145m
1 year return: 78%
EUR plans to produce 10,500t of lithium hydroxide over ~20 years from the flagship ‘Wolfsberg’ project in Austria.
Recently updated numbers for Wolfsberg ahead of a DFS due out in Q3 include an $862m NPV, based on a hydroxide price of $US26,000/t.
The company anticipates a funding mix of 60% debt to 40% equity to finance project construction.
Stage: advanced scoping study completed
Market cap: $72m
1 year return: +143%
INF is currently in court fighting the cancellation of its project permit, which is the reason for its low market cap.
‘San José’, which includes the second-largest JORC hard rock lithium deposit in the EU, is expected to produce 19,500 tonnes per annum lithium hydroxide over 30 years, according to a recent underground scoping study.
It would cost ~$US532m to build.
NOW READ: Battle to a Billy — Which ASX lithium stock will be next to hit the $1bn market cap?
