High Voltage: Lithium smashing it as Ganfeng predicts prices will rise further

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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

If you want to know how far the wheel has turned in lithium since the market’s oversupply crisis sent prices and miners tumbling a couple years ago, just check out Ganfeng’s actions of late.

The Chinese major has been as aggressive as a Serena Williams forehand on the acquisition front, putting up a combined US$400 million in investments in an attempted buyout of Bacanora Lithium and its Sonora Project in Mexico, and grabbing a 50 per cent stake in the Goulamina development in Mali owned by Firefinch (ASX: FFX).

The lithium giant looks eager to expand its own access to spodumene tonnes, and is being underpinned by bullish internal projections about where the market is heading.

“The industry is rapidly growing and we have a very upbeat forecast on lithium consumption,” Bloomberg reported vice chairman Wang Xiaoshen as saying. “I can’t rule out the possibility for lithium prices to bounce back to the 2018 level.”

There remain some risks if supply again comes on too quickly or EV sales slide, but Wang believes the market could enter deficit later this year or next.

“We will step up efforts on the exploration of lithium resources to meet the market needs,” he said.

Reports have already started to flow of South American companies renegotiating contracts or cancel commitments on the back of higher prices.

Fastmarkets saw prices for lithium hydroxide monohydrate cif China, Japan and South Korea at US$14.50-$16/kg last Thursday, up from US$8.50-9.50/kg in early December.

Australia sees lithium bringing in $2.5b by 2023

One group keen to see lithium take off again is the Australian Government.

Writing in the June Resources and Energy Quarterly, analysts from the Office of the Chief Economist predict lithium hydroxide prices will average US$14,290/t, with spodumene prices hitting US$740/t.

Prices have already outshot the office’s recent forecasts though.

Spodumene prices, according to the report, have already risen 58% between December and May, forcing a 44% revision upwards in export earnings from $1.4b to $2b for Australia’s lithium miners in 2021-22.

By 2023, that will be $2.5b, up from just $1.1b in 2019-20.

Here’s how ASX battery metals stocks are performing

Scroll or swipe to reveal table. Click headings to sort.

ADAVALE RESOURCES (ASX:ADD)

Adavale Resources is conducting maiden drilling at its Kabanga Jirani project in Tanzania.

The nickel explorer is up 669% over 12 months and 18 per cent for the week, a bright run that can’t be solely explained by its strategic alphabet-ordered place at the top of our watchlist.

The project is directly next door to the US$664m Kabanga project being developed by privately-owned Kabanga Nickel, and was owned by BHP for a number of years.

A 3000m diamond drilling campaign is under way, with six of the 16 targets identified in geochemical and geophysical surveys considered “high priority”.

PILBARA MINERALS (ASX:PLS)

Pilbara Minerals has announced plans to restart the old Altura Minerals project at its Pilgangoora mine on the back of improved spodumene prices.

Altura was a major competitor to Pilbara, effectively sharing a border and an orebody with the $4 billion capped lithium producer before going under when the price of lithium crashed.

Renamed Ngungaju, the former Altura plant is due to begin a staged restart in the December Quarter, ramping up to 180,000-200,000 dry metric tonnes by mid-2022.

It will help Pilbara Minerals ramp up to a combined run rate of 560,000-580,000dmt a year, with the company also announcing Friday it expected to beat the upper range of its 75,000-90,000dmt guidance for the June Quarter by shipping about 96,000dmt of spodumene concentrate.

VANADIUM RESOURCES (ASX:VR8)

This vanadium explorer was up as high as 9c last week after releasing a PFS on its 50% owned ‘Steelpoortdrift’ project, where it’s heading toward ~74% ownership.

It has since retreated but remained a 31% gain for the fortnight as of yesterday and 272% up over the past 12 months.

The South African-based mine would cost US$200m to build and produce 39Mlbs of vanadium pentoxide a year over a 25 year life, using a price of US$9.03/lb, pretty close to current levels.

According to the PFS the capital cost would be paid off in a little over two years, with a post-tax net present value of US$1.2 billion on a 100% basis, average annual cash flow of US$139 million, and very low operating costs of US$3.08 per lb of V2O5.

“The PFS has once again confirmed our belief that the Steelpoortdrift project is well positioned to become a significant high volume and low cost producer in the market,” the company’s CEO Eugene Nel said.

>>> Lithium, graphite, cobalt, rare earths, vanadium or nickel stocks missing from our list? Email [email protected]

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