High Voltage: Battery metals are booming, but don’t buy the FOMO
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Our High Voltage column wraps all the news driving ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths and vanadium.
Prices for battery metals like lithium, cobalt, graphite and nickel are recovering at a rapid rate.
In February, cobalt hydroxide and metal recorded largest-ever month on month gains of 38.3 per cent and 23.2 per cent respectively, Benchmark Mineral Intelligence reports.
Chinese lithium carbonate prices surged 68 per cent in the first two months of 2021. The price of spodumene — the main lithium bearing mineral mined from hard rock lithium mines, like those in WA – also continued to improve.
And tight supply saw prices for nickel sulphate increase by 6.3 per cent.
It’s good news, and the EV story is only getting started.
But stock volatility, investor mania, and FOMO – fear of missing out — are real.
Aussie EV and alternative energy stocks just went through a bubble that seems to have quickly run its course, judging by the heavy falls in the last two weeks, says Far East Capital’s Warwick Grigor.
“The speculative end of the market has been very volatile this year, initially with spectacular gains that have been almost unbelievable — except that seeing is believing,” he says.
For example, investor favourite Vulcan Energy (ASX:VUL) hit a January peak of $14.20 a share before falling to $5.70 — and yet it remains +2333 per cent over the past 12 months.
“These sectors will have additional runs as the year progresses, but you will have to get your timing right,” Grigor says.
In the US, green energy momentum has also exploded.
“Investors have taken notice and poured huge sums of capital into green ETFs,” natural resource investors Goehring and Rozencwajg say.
“Shares outstanding of the four most prominent clean energy ETFs are all up between three- and six-fold.
Stretched valuations leave investors vulnerable to any setback or delay in the green energy transition, they say.
“The ICLN ETF holdings currently trade at 70x earnings, 6x sales and 6.25x book value, suggesting dramatic growth is already priced in.
“What would happen if the energy transition proved more challenging than anticipated?”
Here’s how a basket of ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths and vanadium are performing>>>
Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop:
“Is there a re-rate around the corner for this explorer?” asked expert stock picker Simon Popple early last week.
It sure looks like it.
Mandrake’s Jimperding project is near Chalice’s mammoth Julimar nickel-copper-PGE discovery which sparked a ~2,500 per cent gain in the Chalice share price.
Meanwhile nickel is booming, as are platinum group elements (PGEs) like palladium and rhodium.
Mandrake is looking for a Julimar of its own and will drill the ‘Newleyine’ prospect at Jimperding later this month.
Last week Metals Australia acquired the Nepean South nickel project near Coolgardie in WA.
The project is along strike from the historic Nepean nickel sulphide mine, 80 per cent owned by Auroch Minerals (ASX:AOU).
Metals Australia plans to undertake an airborne electromagnetic survey to be followed up by a drilling campaign.
South Aussie-based graphite project developer Renascor is up 590 per cent in 2021.
The company says it is on track to be “the world’s first integrated, in-country mine and purified spherical graphite operation outside of China”.
Right now, China controls 71 per cent of worldwide natural graphite supply, 65 per cent of worldwide synthetic graphite supply, and 100 per cent of commercial spherical graphite supply.
Europe and the US are making concerted efforts to control their own supply chains, which means bringing new, non-Chinese supply – like Renascor’s — on stream.
Cashed up lithium explorer EMH is fully funded to a final investment decision at its Cinovec project in the Czech Republic — the largest hard rock lithium deposit in Europe.
This ~$150m market cap stock has been a beneficiary of the battery metals resurgence, up 230 per cent over the past six months.
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