High Voltage: Lithium offtake deals flying thick and fast as prices go up, up, up
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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.
Cobalt prices jumped 11.5% month-on-month in December, continuing their seven-month rally on robust spot demand.
Supply was also limited as COVID-19 restrictions throttled production by Chinese refineries, according to Benchmark Mineral Intelligence.
Lithium continues to smash pricing records in 2022, with desperate buyers scrambling for units on the thinly traded spot market amid low supply.
Despite the current high prices for battery-grade lithium carbonate, market participants are still bullish, according to price reporting agency Fastmarkets.
“[Industry] expect prices to rise even further in the first quarter of 2022 amid tight supply and firm demand,” it says.
Meanwhile, strong demand from the Chinese anode value chain — alongside industrial demand outside of China — lifted the Benchmark Flake Graphite Index by 1.8%. Prices are now up 20-25% over the past year.
With most of the world’s current lithium production locked away in long term deals, customers – the downstream chemicals producers, battery makers and EV makers – are desperately turning to the next class of producers to secure future supply.
Yesterday, market darling Liontown (ASX:LTR) announced a maiden offtake deal with Korean electronics giant LG, which will buy 100,000t of spodumene from the $473 million Kathleen Valley project in the first year of a five-year deal, starting in in 2024.
That rises to 150,000t per year for the remainder of the deal, which has an option for another five-year term.
The deal represents around a third of Kathleen Valley’s start-up capacity, which is expected to increase to ~700,000tpa after a second stage expansion a few years after operations begin.
LTR is one of the best performing stocks on the ASX in recent times.
It has grown from $14m minnow to $3.4 billion near term miner since acquiring the Kathleen Valley project from gold miner Ramelius Resources (ASX:RMS) for 25 million shares (at ~2c per share) in August 2016.
It plans to start mining in 2024. Stockhead’s Josh Chiat caught up with MD Tony Ottaviano for his view on the big deal and how Liontown plans to play the rising market.
In December, German automaker Volkswagen and commodity trading firm Traxys signed binding lithium hydroxide offtake agreements with Vulcan Energy Resources (ASX:VUL) and Lepidico (ASX:LPD), respectively.
For Lepidico, this represents 100% of the production of lithium hydroxide (5,000tpa) from the company’s planned Phase 1 Project, which is due to fire up late 2023.
Vulcan’s deal with VW is for 34,000 tonnes – 42,000 tonnes of battery grade lithium hydroxide for an initial five-year term, starting in 2026.
Here’s how a basket of ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, and vanadium are performing>>>
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This emerging lithium play didn’t need news to send it up 55% for the week.
ESS’ focus is the ‘Pioneer Dome’ lithium project in WA, which contains an actual resource – more than most explorers can boast — of 11.2Mt at 1.21% lithium.
“While continuing exploration to grow our lithium resources and potentially make new discoveries, we are taking the necessary steps to transition the Dome North Resource area to a ‘development ready’ status,” ESS said in November.
“This includes an application for a Mining Lease over the Dome North Mineral Resource, a capital and operating cost study for two process plant scenarios, a flora and fauna study and a hydrology study, most of which are expected to be complete by the end of this year .”
A 13-hole drilling program at Dome North is expected to be completed mid-January.
Newly listed copper and gold explorer LRV is kicking off a lithium and base metals focused auger soil geochemical sampling program at the Eyre Project in WA as soon as Native Title clearance is received.
The company says historical exploration has identified broad anomalous zones of lithium that have never been followed up.
“Geology and geophysics tell us the host rocks for the Liontown (ASX:LTR) lithium resource extend into our ground and we have a robust lithium soil anomaly generated by Anglo Gold and confirmed by us, that is coincident with the extension of the Liontown host rocks into our project area,” managing director Ron Heeks says.
“Around Mt Norcott and within the Jimberlana Dyke we have a copper soil anomaly generated by WMC with a single drill hole in the 1960s and confirmed by Newmont in the 70s that has never been followed up.”
He said the geochemistry program will lead to future geophysics and drilling to refine both anomalies.
Larvotto made its debut in early December 2021 following a $6 million IPO at $0.20 per share.
In October, SHH identified lithium potential at the ‘Dundas’ project which — like Larvotto’s ground — is interpreted to be along strike from Liontown’s (ASX:LTR) 14.8Mt ‘Anna’ resource.
The WA project had been initially targeted for gold, which meant historic drilling which intersected pegmatites was not assayed for lithium.
Auger soil sampling and RAB drilling planned at Dundas will test both the gold potential of the greenstone belts and the lithium potential of the pegmatites, SHH says.
In November, RAG inked a non-binding deal to buy WestOz Lithium, which has four tenements in the Pilbara and one in the Gascoyne.
“WestOz has applied for a significant land area in a premium location, in close proximity to established lithium operations such as Wodgina and Pilgangoora,” RAG chairman Steve Formica says.
RAG is conducting a review of historical geological information and other project information during the due diligence period, which has been extended until January 31.