‘Everyone should have exposure’: Lithium players bullish on demand outlook
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A lithium junior backed by the world’s largest battery maker says “everyone should have exposure to lithium” as demand for electric vehicles has turned the once obscure metal into the world’s hottest commodity.
“I’d suggest every portfolio should do with some exposure to lithium,” said Lithium Plus Minerals (ASX:LPM) director Simon Kidston on stage at the International Mining and Resources Conference in Sydney on Friday.
“Lithium’s got a very bright future, I believe over the next decade.”
Around 9% of the company is owned by CATL, a Chinese firm which holds the largest share of what is currently a US$44 billion global battery market at over 35%.
It opens up a potential offtake pathway for Lithium Plus, which holds the ground around Core Lithium’s (ASX:CXO) Finniss mine in the Northern Territory, around an hour south of Darwin.
“The program this year is all about aggressive exploration, the intention is to publish a maiden JORC resource by March of next year,” Kidston said.
“That’s an important milestone for the business and having done that by March of next year we’ll then continue with the drilling campaign through the balance of next year.
“I think at that stage, we would hope to define 3, 4, 5 deposits, similar to style (that) has been identified by our neighbors at Core.”
While LPM is, unusually for a lithium explorer, down this year to date, Core’s discovery and decision to proceed to development of the 110,000tpa mine has turned the one time penny stock into a $2.5 billion ASX company, up 125% in 2022.
Such rapid share price rises have prompted some commentators to caution the market could become a bubble, if prices for the metal which have climbed fourfold this year to new highs for both spodumene concentrate and downstream battery chemicals fall hard from record levels.
“Can it go higher? Absolutely,” John Forwood, chief investment officer of the Lowell Resources Fund (ASX:LRT) said.
“But I think if you look at the shape of the price graph, it’s gone almost vertical.
“You start to worry that there’s a big fall coming at some point.”
Many analysts continue to have bullish outlooks for EV sales growth and, following on from that, lithium demand.
CRU Group head of Australia and New Zealand Alex Tonks told delegates at IMARC this week that lithium demand would increase 15 times over the next two decades.
The industry is expected to be at the epicentre of the type of expansion not seen since the start of the iron ore boom in the early 2000s, when China’s economic and manufacturing expansion powered a dramatic rise in steel production and consumption.
While lithium is not a scarce metal, there remain barriers to production.
Having the resources on hand is one thing. Extracting and processing is another, something that could get in the way of US efforts to wean off supplies from its trading competitor in China, a place which erects chemical conversion plants at the pace an Aussie could only achieve in Sim City.
“We think it’s going to be very, very difficult at this stage to exclude China, given its absolute dominance of mainstream processing basically,” Tonks said.
The other sides of that multi-faceted challenge include social licence to operate and jurisdictional risk, with local community opposition stunting Rio Tinto’s (ASX:RIO) bid to deliver its Jadar mega mine in Serbia and a number of North American proposals dealing with what some (aka our deputy ed. Reuben Adams) have termed NIMBYism.
The largest and to date friendliest lithium jurisdictions have been Western Australia, home to half of the world’s LCE equivalent lithium production, Argentina and Chile.
The latter has sent shudders through the sector, however, with a new constitution and tax laws that would increase the State’s intake from its massive copper mines drawing concern from miners.
Lithium Power International (ASX:LPI), which owns the $1.4 billion NPV Maricunga brine project in Chile, took to the ASX on Friday to allay concerns it could run into ownership issues at the first stage of its ~2Mt development.
“In response to news that appeared in the Chilean press regarding the exploitation of Lithium in the Salar de Maricunga, LPI confirms that the standing of its concessions and permitting according to Chilean law is solid,” the explorer said.
“This has been reinforced by multiple legal positions during the last three years from the large and specialist law firms in Chile.
“LPI has absolute confidence in the Chilean legal system and in its strict compliance by its authorities, including ministers, where only the courts have the jurisdiction to interpret laws.
“These authorities have approved and supported LPI in the development of the project from its inception, always ensuring equal treatment and protection for foreign investors in Chile.”