Eye on Lithium: Chemical prices are down but lithium miners remain upbeat

• Lithium chemical prices continue decline
• Miners unconcerned about long-term fundamentals
• Boadicea farms-out Hanns Gully lithium tenement

All your lithium news, Thursday April 20.

Despite the continued degradation of lithium chemical prices in China with Benchmark reporting that its lithium price index had decreased by 14% in the assessment period from April 5 to April 19, the response from at least some Australian lithium producers seems to be a simple ‘meh’.

In its first quarter production results, Rio Tinto (ASX:RIO) noted that lithium carbonate prices had fallen sharply over the March 2023 quarter due to the termination of China’s electric vehicle subsidy and a price war in China’s auto market.

However, it added that while short-term uncertainty remained due to the global economy slowing and rising interest rates dampening consumers’ discretionary spending, the long-term outlook remained favourable as governments continued to push for EV adoption – as demonstrated by the Australian Government’s recent release of its EV strategy.

This was backed by Allkem (ASX:AKE), which noted that the first quarter of the calendar year is historically the slowest period of the year for lithium consumption due to adjustments to EV subsidy policy, seasonal destocking, scheduled maintenance outages and the Lunar New Year break in China.

It highlighted that, despite this, demand continued to grow steadily in volume, albeit at a lower rate than expected and slower than what many had become accustomed to over the last few quarters.

Alkem pointed out that some EV manufacturers had sought to gain market share through engaging in price discounting, which led consumers to delay purchases in the hope of further price reductions while internal combustion engine manufacturers pursued aggressive price reductions to clear stock.

“This slower-than-expected EV growth impacted the battery material supply chain, which had procured feedstock and built capacity in anticipation for a higher growth rate,” the company noted.

“As a result, inventory levels reached what has been perceived as high level but, in reality, is a more normalised situation.

“This is in contrast to the extremely low stocks held in 2022, especially considering the complex, geographically diverse and geopolitically risky lithium supply chain characteristics.”

Like Rio, Alkem notes that the fundamentals underpinning lithium demand remain very strong with global EV sales forecasts remaining at about 14 million units, which implies a steady acceleration during the remainder of 2023.

In particular, it noted that spodumene supply remained tight despite production increases as most of the product is already locked under existing offtake arrangements.

Here’s how ASX lithium stocks are tracking:

The nays have it today with 54 companies in red while just 30 companies managed to stay positive. The remaining 70 companies were unchanged.

WHO’S GOT NEWS OUT?

Here’s a selection of companies with fresh news.

Boadicea Resources (ASX:BOA)

The company has completed the farm-out of its Hanns Gully lithium tenement in Queensland to unlisted explorer Daly Resources, which seeks to list on the ASX later this year.

Under the agreement, Daly has paid $50,000 to Boadicea and will pay a further $50,000 on its listing on the ASX.

Daly will spend $500,000 on the project over the next 2.5 years to earn a 51% interest in Hanns Gully and a further $500,000 over a further two years to take its stake up to 80%.

This ensures that Boadicea is free carried on any expenditure to the cap during this period.

Once all earn-in conditions are met, the two companies will form an 80/20 joint venture.

Hanns Gully is located just 11km southeast from the Croydon gold mining district but was identified by Boadicea as being prospective for greisen-style lithium mineralisation with additional potential for gold mineralisation.

Infinity Mining (ASX:IMI)

Maiden scout drilling at Infinity’s Tambourah South tenement has identified a lithium-rich system with both spodumene and lepidolite is present under outcropping pegmatites.

The 21-hole program totalling 1,812m tested three areas that had been mapped and surface sampled with pegmatites testing up to 2.636% Li2O.

A total of 41 individual pegmatite units were logged in 18 of the holes with thicknesses ranging from 1m to 35m.

Down hole logging and assay also indicate that the outcropping Lithium bearing pegmatites are relativity steeply dipping and, in some areas, appear to merge at depth while drilling also intersected blind or concealed pegmatites, which do not outcrop.

Westar Resources (ASX:WSR)

Westar has kicked off maiden drilling at its Olga Rocks lithium-gold project to test three interpreted pegmatite corridors with about 1.5km of strike in the Central Zone.

The drill program leverages historical exploration drilling which intersected thick albite-rich pegmatites but were untested for lithium-caesium-tantalum style mineralisation.

Olga Rocks is located within the emerging Forrestania lithium district, which hosts Covalent Lithium’s Mt Holland project along with Zenith’s recent lithium pegmatite discovery at the Split Rocks project.