High Voltage: Macquarie says ‘valuation upside remains’ for ASX lithium, rare earths miners
Link copied to
Our High Voltage column wraps all the news driving ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, manganese, magnesium, and vanadium.
High petrol prices are driving people to buy electric vehicles or hybrid cars, Macquarie says.
“To fill up a BMW 3 tank costs A$100 while to fully recharge a Tesla 3 using the supercharger will only cost ~A$30,” Macquarie analysts said in a note earlier this week.
“The difference is material, which makes EVs more appealing to many.”
— Cut The Nozzle (@CutTheNozzle) March 17, 2022
Macquarie’s Asia auto team also noted that EV shopping consideration rose 69% from January when petrol prices started to rise.
“Shopping consideration for hybrids and fuel-efficient subcompact and compact sedans also rose by 32% and 16%, respectively,” it says.
That is despite battery metals prices going through the roof, which impacts the upfront cost of owning an EV.
When raw materials prices go up, lithium ion battery prices go up, and EV prices go up.
In 2015, raw materials were 40% the cost of a lithium ion battery. Today they are 80%.
— Simon Moores (@sdmoores) March 27, 2022
That price squeeze isn’t going away, with Macquarie predicting that the lithium market will now remain in deficit for the foreseeable.
Other raw materials, like cobalt, rare earths, and graphite, could follow a similar path.
Macquarie likes Aussie miners. It says valuation upside remains for all covered ASX lithium and rare earths stocks.
“Our preference for Australian-based producers remains unchanged, with Pilbara Minerals (ASX:PLS) our key pick, offering strong near-term production growth,” it says.
“Mineral Resources (ASX:MIN) remains one of our preferred stocks in the broader resources sector.
“Allkem (ASX:AKE) offers unique exposure to both lithium brine in South America and spodumene production in Australia.
“Our positive view on Iluka Resources (ASX:ILU) is underpinned by strong zircon and pigment raw material demand ex China. Lynas Rare Earths (ASX:LYC) is the largest rare earths producer outside of China with a full value chain.”
Here’s how a basket of ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, magnesium, manganese, and vanadium is performing>>>
Battery metals stocks missing from our list? Shoot a mail to [email protected]. Be nice, he’s fragile.
KTA exploded out of a trading halt to announce a “major clay hosted rare earth discovery” at its ‘Mt Clere’ project in WA.
Clay hosted deposits – like the ones exploited in major producer China — are commonly considered to be some of the cheapest and most readily accessible sources of heavy rare earths.
The first batch of drilling assays from Mt Clere’s ‘Tower’ prospect have returned a multitude of thick, shallow hits like 15m at 1,395ppm (parts per million) total rare earth oxides (TREO) from 16m depth.
The company has only covered a 6km area so far, CEO Mark Major says, with the thick and shallow mineralisation remaining ‘open’.
“This discovery has come at a great time for the company and our shareholders,” CEO Mark Major says.
“Demand for these magnetic and critical REEs are expected to increase over the next 10 years, as the world embarks on the electric revolution.
“Significantly, we have multiple other high priority targets within the extensive 2,300km2 property.”
RAG says new drilling results — like 146.3m @ 0.56% Ni, 0.49% Cu & 0.05% Co from 393.5m — shows the potential scale of the ‘Granmuren’ discovery, part of the ‘Tullsta’ nickel project in Sweden.
“The modelling and interpretation to date show this to be an extensive system with the potential to host significant tonnage of nickel-copper-cobalt metals,” RAG chairman Steve Formica says.
Mineralisation starts from the surface and continues down to 400m vertical depth, he says.
“It is open and increasing in size and grade with depth, similar to Anglo American’s Sakatti Deposit in Finland which Ragnar continues to form its geological modelling around.”
An updated prefeasibility study (PFS) – an advanced look at the economics of building a project – has commenced at GME’s flagship NiWest nickel laterite project in WA.
The update would consider the impact of higher nickel and cobalt prices since the original PFS was completed in mid-2018.
“Nickel is currently trading above US$15/lb compared to the US$8/lb assumption applied in the PFS, which returned projected free cashflow of A$3.34 billion and NPV8 of A$791 million,” GME says.
It should be completed in the June quarter this year.
According to GME, NiWest hosts one of the highest-grade undeveloped nickel laterite resources in Australia, estimated to contain 85 million tonnes averaging 1.03% nickel and 0.065% cobalt.
The 2018 PFS envisaged average annual production in the first 15 years of 19,200tpa nickel and 1,400tpa cobalt at an All-in Sustaining Cost of US$3.48/lb of nickel.
$250m market cap JRL is repositioning itself as a pure-play lithium company, focusing on the advanced McDermitt project in Oregon, USA.
Jindalee’s Australian assets will be separated into standalone vehicle listed on ASX (NewCo).
They include a landholding the Widgiemooltha district and the Lake Percy Project (which are both prospective for nickel, gold and lithium) together with its interest in the Prospect Ridge joint venture in Tasmania.
“The board believes that the favourable political climate in the United States following bi-partisan expressions of support for the development of an integrated domestic lithium-ion battery value chain, coupled with the well-known electric vehicle thematic, create the ideal backdrop for the proposed Demerger,” chairman Justin Mannolini says.
The company expects to publish an updated mineral resource estimate for McDermitt in the current quarter and has planned a further drill program for the second half of the calendar year.
Jindalee shareholders will retain exposure to the WA assets via an in-specie distribution of NewCo shares.
If approved, the demerger is expected to be completed in the September quarter of 2022.