Diggers and Dealers Day 3: Lithium, uranium deficits excite presenters in Kalgoorlie
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Charged up by both the resurgence of the lithium sector and its own progress at the Kathleen Valley Lithium Project in the Goldfields, Liontown Resources is one of the strongest performers among the presenters at Diggers.
The firm is up ~640% over the past year.
CEO Tony Ottaviano joined Pilbara Minerals boss Ken Brinsden in toasting the ebullient mood around the battery metal, which has benefitted from price rises in downstream chemicals to the tune of around 100% this year.
“We’ve taken a perspective internally and we’ve established what I call our P50 outlook, and even that’s under pressure in the last couple months,” Ottaviano said.
“If you talk to some of our customers some of them are saying the deficit is there today.
“We’re planning for 2024 where we see that major structural deficit presenting itself and supply will be harder than people think to bring on.
Ottaviano noted Kathleen Valley would be the next highest grade hard rock lithium deposit in Australia after the famous Greenbushes mine and Wesfarmers and SQM’s Mt Holland lithium mine.
“With a 40 year mine life it underpins further expansion and possibly downstream processing, the pegmatite in places is up to 70m thick and our stopes will be the size of an Olympic swimming pool,” he said.
While hard rock lithium miners like Liontown have borne the brunt of criticism about their carbon footprint from “zero carbon” plays like geothermal lithium market darlings Vulcan Energy (ASX:VUL), Ottaviano said Kathleen Valley would be “net zero” within 10 years, with at least 50% renewables in its energy mix on opening.
With the recent successes of Firefinch (ASX:FFX) and West African Resources (ASX:WAF), West African explorer Tietto Minerals is wading into a space that is becoming recognised for its recent success, even if general investors have concerns about African jurisdictions, with its 3.35Moz Abujar project in Cote D’Ivoire.
Speaking on Wednesday, Tietto’s Mark Strizek outlined why the West African nation was a good place to be.
“It’s a great destination, there’s some majors there in Endeavour and Perseus,” he said.
“We’re right in the middle there in a great location for infrastructure.
“Cote D’Ivoire is a very sophisticated economy and mining only makes about 2% (of GDP), it’s a young workforce and the economy has been growing in double digits for the last 10 years.
“We’ve got access to very cheap green hydropower and the government has the stated aim to try increase the amount of mining and as you can see there’s a lot of discoveries to be made.”
According to a pre-feas in April, Tietto will product 168,000ozpa of gold over an initial 6 year mine life including some 200,000oz in its first 12 months of operations at a cost of $230 million.
That would be paid back in 2.8 years, generating a pre-tax NPV of $363 million at a gold price of just US$1506/oz (US$300/oz below current levels).
Despite the prospect that hungry gold miners could circle Tietto for the Abujar asset, Strizek said the junior is committed to building it on their own.
Paladin Energy boss Ian Purdy says nuclear utilities are facing a supply crunch that will see them return to locking in long-term contracts with uranium producers.
The company has cleared the debts that sent it into administration a few years ago, and is aiming to restart Langer Heinrich in the coming years, a development that would be the third largest in the world not owned by a State-owned entity.
“We like to look at fundamentals and it is a supply deficit, growing demand story,” Purdy said.
“Where we sit today there is a current uranium deficit. The amount of uranium being mined every day of the week does not meet consumption … and that is an undisputable fact.
“The industry has been living off stockpiles for a long period of time, and those stockpiles are drying up. You cannot outrun the economics.
“What we’ve also seen over the last few years is utilities have been focused on their short term purchases and that’s left them exposed in the mid and long term.
“We’re starting to see some activity where the utilities are moving back to the long term market, and they’re starting to take a view that they need to start locking in contracts and we’re expecting that momentum to pick up over the next few quarters.”
Boss Energy boss Duncan Craib, whose company owns the Honeymoon uranium restart project in South Australia, is positive about the prospects of price increases for the long depressed energy commodity.
In particular he said the introduction of the Sprott Physical Uranium Trust, which is buying up physical yellowcake outside the traditional utility market, has the potential to drive up prices.
“With off market dealings occurring with the utilities that also signifies they’re trying to front run this Sprott transaction,” he said.
“In our industry it’s very exciting and it shows there’s signalling awareness of this developing uranium market.
“We believe prices will rise to the mid-US$30s to high-$US30s on the spot price level by the calendar year end and with that a real uplift in the actual term contract, which is when we’ll start getting excited.
“Liquidity is key and in the near term Sprott is going to bring that. We simply don’t believe and don’t feel the depth of supply is there on the spot market, so feel it’s being primed.”
Paladin’s Purdy was also bullish about the idea nuclear power will eventually be accepted in the mainstream alongside renewable energy as global economies look to hit emissions reduction targets by removing coal, oil and gas from the power generation mix.
“When we restart Langer Heinrich, we will displace 1.3Bt of CO2 from the global electricity system and that’s what we’re focused on,” Purdy said.