High Voltage: Patience … lithium prices could be in the toilet for a while
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Each week our High Voltage column wraps all the news driving ASX battery metals stocks with exposure to lithium, cobalt, graphite, manganese and vanadium.
All long-suffering battery metals investors want to know when lithium prices are going to recover. The real answer is that no one knows, and even the best estimates are just educated guesses.
What we do know is that spodumene producer Mineral Resources (ASX:MIN) told investors on Friday that it was selling concentrate for $US520.92/t ($757.74) in the December quarter; a fall of $US88/t on the prior quarter.
It’s also $US550/t less than the price Mineral Resources fetched in late 2018, which gives you a sense of how dismal things are right across the board.
S&P Global reckons that the “oversupply of lithium chemical compounds that forced prices down in 2019 should persist in 2020 as the electric vehicle revolution will not accelerate in tandem with recent — and upcoming — increases in supply”.
According to forecasts from September, the world’s total output should reach 560,000 tonnes of LCE in 2019 and exceed 800,000 tonnes in 2020, S&P says.
But longer term, 2020 could prove a decisive year for lithium hopefuls.
“According to several market analysts, 2020 will be a key year for the future long-term lithium supply,” S&P says.
“If some new projects don’t find the required financing in the coming months, the current oversupply is likely to suddenly shift into shortage in a few years as electric vehicles spread out globally.”
Of the companies on our list, 66 lost ground, 40 were ahead and 43 were steady this week.
Market Cap: $43m
On Monday, New York fund Lind Partners invested $6.3m into the diversified battery play, sending the stock on a crazy run.
Unlike other lithium small caps, Lithium Australia wants to make money in three ways — by producing advanced battery cathode powders, selling storage batteries in JV with a Chinese firm, and recycling old batteries through its Envirostream subsidiary.
“We have been following Lithium Australia since 2013,” Lind boss Jeff Easton says.
“In that time, we have seen Lithium Australia evolve from an explorer to a diversified battery and battery minerals company with three distinct complimentary business units with excellent commercial potential.”
Market Cap: $39m
On Friday, advanced African lithium explorer Prospect released an updated definitive feasibility study for its flagship Arcadia project in Zimbabwe, which the company calls ‘robust’.
‘Robust’ is the most criminally overused, meaningless superlative in small cap resources land.
But in this case the robust hat actually fits. Among other things, Arcadia would cost $US162m to build (pretty good) and boast an internal rate of return of 71 per cent, pretax (that’s very, very good).
The same day it signed an initial MOU with global energy company Uranium One over a potential investment or off-take agreement. And then on Monday Prospect locked down an all-important power supply agreement for the project.
Finally — a handful of major lithium producers had a rare win despite the depressing near-term outlook; Orocobre (ASX:ORE) +15%, Galaxy Resources (ASX:GXY) +11%, and Mineral Resources (ASX:MIN) +10%.
Here’s a table of ASX battery metal stocks with exposure to lithium, cobalt, graphite, manganese and vanadium>>>
Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop: