Barry FitzGerald: The rumble in resources is that lead is dead. It’s actually just firing up
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There is a misconception that lead is dead because of the rise of electric vehicles with their fancy lithium-ion battery packs.
Far from it, and Garimpeiro reckons it has opened up opportunities for investors prepared to look beyond the noise about lead’s demise.
About 85% of lead production is used in the production of the ever reliable 12V lead-acid batteries found in internal combustion engine cars, and every EV as well – to handle safety and auxiliary functions where dependability is paramount.
A $US20 billion market in 2020, the lead-acid battery market is forecast to grow to $US32 billion by 2030, with demand from ICE/EVs and the renewable energy storage sector the primary growth sectors. Lead demand grows in tandem.
Most of the world’s primary lead (it is the one of the most recycled metals) comes from zinc-lead-silver mines. But there are projects where lead dominates (with a silver kicker), and there are more of them on the ASX than might be suspected.
Funny thing is that they have been largely overlooked in recent times despite the lead price moving to a three-year high on COVID supply constraints and the demand surge from lead-acid batteries as the world’s auto companies crank up production from COVID-hit levels.
Lead last traded at $US1.05/lb. That is up by 28% on the average for last (calendar) year of US82c/lb.
That is in keeping with the other base metals as the world responds to the massive economic stimulus unleashed in the major economies to ensure economic growth in the wake of COVID.
As suggested earlier, lead’s move to three-year highs and its favourable supply-demand picture has not been reflected in the ASX stocks where lead is the dominant metal for the companies. The same goes for silver which can be more than a sideshow for the lead stocks.
Silver was last quoted $US26.30/oz which compares with last year’s average of $US21/oz and its 2019 average of $US16/oz. Thanks to the metal’s greater industrial applications, including solar panels, it has strongly outperformed gold which is flat in the last 12 months.
Garimpeiro has had a ferret about and has come up with three lead stocks on the ASX that could be worth watching.
Galena Mining (ASX:G1A): Trading at 22.5c for a market cap of $104 million. Developing the Abra lead-zinc project in WA’s Gascoyne region. Planned annual production is 95,000t of lead and 805,000ozs of silver. Initial mine life is put at 16 years but there is tonnes of exploration upside.
Japan’s Toho Zinc is as 40% partner in the project which is forecast to have a robust cash cost of production of US44c/lb.
Boab Metals (ASX:BML): Trading at 42.5c for a market cap of $66m. It is working towards making a development decision on its Sorby Hills lead-silver project near Kununurra in WA in the second quarter of 2022, with production to follow in 2023. A high silver count – the deposit contains 54m ozs – helps deliver low cash costs of production, forecast at $US40c/lb.
China’s Henan Yuguang – the country’s biggest lead smelter operator, and its biggest silver producer – is a 25% partner.
Rumble Resources (ASX:RTR): Trading at 52.5c for a market cap of $320m. No surprises that Garimpeiro has included this one. As mentioned previously, its Earaheedy zinc-lead (plus manganese and silver) discovery earlier this year has potential Tier 1 credentials which will take time to tease out.
An exploration target of 100-120 million tonnes grading 3.5-4.5% combined zinc/lead at shallow depth is the first target on the way proving the discovery is something special.
Zenith Minerals (ASX:ZNC) is a 25% partner.