Ground Breakers: Lithium chemicals are fetching record prices as battery stocks outpace coal
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Lithium carbonate prices have surged to all time highs, with battery metals leading the charge among ASX 300 mining stocks this morning.
According to battery metals price monitors Benchmark Mineral Intelligence, lithium carbonate prices rose by 26.5% to RMB160,000/t, the equivalent of US$24,800/t in the fortnight to September 30.
That eclipses the high of US$24,750/t seen on March 30, 2018 and, according to BMI “marks a new era for the lithium industry”.
<thread> Lithium prices.
In 2019 I was asked whether lithium prices in the next price surge would ever reach the highs of 2016.
My response was this time it would be more aggressive. Instead of the late 20s, prices in China would exceed $40,000/t
There are a few reasons… pic.twitter.com/SLqxRRLF4X
— Simon Moores (@sdmoores) October 6, 2021
BMI is bullish about contract prices going forward as well, with the annual contracting period soon upon us and portions of the supply chain looking to move from quarterly to monthly contracts to capture more of the price upside currently on offer.
“Looking forward, record high spot transactions are likely to incentivise a strong upward revision of contract prices in Q4 as new deals and pricing breaks are negotiated for the start of 2022,” BMI analysts said.
“Historically, supply contracts are negotiated in Q4 and can be influenced by sentiment in the spot market. It is this revision that sparked the surge in lithium chemicals pricing in 2015, indicating that the start of 2022 could see further momentum in price rises.”
“Market contacts have also reported to Benchmark that they expect a larger proportion of the supply chain may look to implement monthly, rather than quarterly, price breaks, fuelling the surge further if typically discounted contracted volumes become more regularly based on escalating spot deals.”
Pilbara Minerals was up 5.08% at 12.15pm AEDT, with Orocobre (ASX:ORE) close behind at 4.14%, driving above a $5 billion market cap.
Vulcan Energy (ASX:VUL) also caught some of the tailwinds.
On the flip side previously soaring coal stocks came off the boil as energy prices moderated overnight, with Yancoal (ASX:YAL), Whitehaven (ASX:WHC) and New Hope (ASX:NHC) all suffering as thermal coal lost 10% of its value overnight.
Diversified miners and gold stocks were much of a muchness at the Materials index traded flat.
St Barbara has been courting gold explorer Kin Mining (ASX:KIN) for some time, emerging not too long ago as a near 20% holder on the Cardinia gold project owner’s register after buying out rich lister Kerry Harmanis’ long-held stake in the junior.
Kin and St Barbara have had similar trajectories in recent years, starting from different bases.
ASX 200 mid-cap St Barbs led a turnaround story at its Gwalia gold mine to become one of the gold sector’s favourite stocks before expansions led to big cost increases at its Gwalia and Simberi operations.
It is eagerly seeking out new sources of ore for the underfed Gwalia mill near Leonora, 230km north of Kalgoorlie in Western Australia.
Kin’s 1.28Moz Cardinia project, where the company put the kibosh on development in 2018, is one of the local satellite resources it would like to hoover up, and seems especially important as a takeover target now that Raleigh Finlayson’s emergence as the boss at Genesis Minerals (ASX:GMD) likely ended St Barbara’s chances at snaring its nearby Ulysses deposit.
Kin announced this morning it would raise $13 million in a rights issue to fund exploration at the CGP after telling St Barb no deal on a non-binding 16c a share offer.
Kin reasoned the takeover would not receive the 75% support it would have needed to receive approval from Kin’s investors.
It’s been a good few days for the lithium bull, which is commissioning the Ngungaju plant it picked up in the buyout of Altura’s Pilgangoora lithium project last year, adjacent to PLS’ own world class Pilgangoora mine.
Coming hot on the heels of a major resource and reserve upgrade, the new plant will add 180,000-200,000dmt to Pilbara’s output once fully commissioned in mid-2022.
The miner confirmed FY2022 production guidance across the entire Pilgangoora project at 460,000-510,000 dmt this morning.
Its previous standalone plant had a 330,000tpa rate, and is ramping up to 380,000tpa, with Pilbara expecting to be able to ramp up to a runrate of 560,000-580,000tpa by the end of the financial year.
It means the company will be able to sell even more uncontracted concentrate into the Battery Material Exchange auction platform that true a top of the market sale in September of US$2240/t.
“With market conditions remaining extremely buoyant and the spodumene concentrate market continuing to show signs of being extremely short of supply, the Ngungaju Plant is expected to be capable of delivering uncommitted tonnes into the emerging spot market including through our BMX platform,” PLS managing director Ken Brinsden said.
“We think that will be a very positive development for the market overall, increasing traded volumes, transparency and ultimately supporting the growth of the lithium raw materials supply chain globally.”