High Voltage: Putin’s offensive impacts nickel, even lithium supply. Aussie-based stocks are there to fill the gap
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Our High Voltage column wraps all the news driving ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, manganese, magnesium, and vanadium.
Russia’s shoddy (but probs successful, at some point) invasion of the Ukraine immediately pushed up prices for oil and gas, Russia’s largest exports.
But it’s also increasing prices for metals that are needed for batteries, such as nickel, which spiked to their highest levels since 2011.
Russian behemoth Nornickel produces around 20% of the world’s supply of high purity class 1 nickel – nickel sulphides — which is used in EV batteries.
Benchmark Mineral Intelligence says this is another threat to Europe’s EV industry, which is already struggling with record high lithium prices and a shortage of semiconductor chips.
“As Europe is looking to build out a local supply chain, with locally sourced raw materials, this is a big headache for European automakers and cell producers,” Greg Miller, an analyst at Benchmark said.
But there is potential upside — rising oil and gas prices, as well as Europe’s desire to reduce its reliance on Russia, could accelerate the transition to EVs and renewable energy.
Fastmarkets says the Russian invasion of Ukraine is also a concern for European lithium buyers, who source some of their lithium salts from Russian suppliers.
“A seller of lithium hydroxide compounds based in Russia told Fastmarkets that for the time being, he did not see any impact on business and that he was still able to ship trucks loaded with material toward Europe on Thursday February 24,” Fastmarkets said Friday last week.
“But he acknowledged that a number of long-term customers based in Europe were concerned about his company’s ability to deliver if the situation deteriorated.”
More generally, lithium prices continue to rise.
In China, prices experienced strong gains for a third consecutive week with spot supply showing no signs of improvement.
“The market is still extremely undersupplied, and there is no sign of any improvement so far,” a Chinese lithium trader told Fastmarkets.
“Chinese lithium consumers have to scramble for any spot units.”
This is a seller’s market, Fastmarkets says. As soon as there is any offer of lithium salts in the spot market, it is immediately secured at a price to the seller’s satisfaction.
“The current headache for all Chinese lithium consumers is still the scarcity of spot units, and I don’t know when it will be eased,” a Chinese lithium consumer source said.
Go through the list of commodities Russia and Ukraine produce – nickel, oil, gas wheat etc – and for many of them, Australia is fabulously positioned to benefit.
Aussie stocks can step up deliveries to address any world shortages, says Far East Capital’s Warwick Grigor.
“It is actually great news for many of our companies,” he says.
“So, maybe there is a silver lining in all this turmoil. We are in for uncertain, but nonetheless, exciting times.”
Here’s how a basket of ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, magnesium, manganese, and vanadium is performing>>>
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This busy WA junior is juggling several balls right now.
Two of these are lithium related – the wholly owned ‘Coolgardie West’ project, and the ‘Nepean’ joint venture with Auroch Minerals (ASX:AOU).
Last week it completed a $2.78m placement which will fund this year’s “aggressive” program of exploration and development.
“Our Flagship Earaheedy [base metals] project will be our primary focus, where we will be prioritising over 30 drilling targets generated from our EM program undertaken in 2021,” LSR chairman Ross Taylor says.
“It will fund the continuing exploration and scoping studies that are being undertaken at the historic Nepean Nickel Mine, where we hold a 20% interest, and our drilling programs for lithium at our Coolgardie West project and the drilling at our Jubillee Well and Bulong gold projects.
“Shareholders can look forward to steady newsflow, starting with the results from our October 2021 drilling at our Neds Creek JV which are expected by the end of February.”
This battery metals stock has produced up to 96.8% flake graphite in concentrate from the advanced ‘Lac Rainy’ project in Canada.
“Outstanding,” says MLS, which will now ship some of this concentrate to Germany where it will be tested to determine its suitability for use in lithium-ion batteries.
In 2020, Metals Australia completed a Scoping Study (the first proper look at the economics of building a project) when graphite was in the crapper.
It demonstrated the potential of Lac Rainy to generate high-operating margins and capital payback by year 4 of a 14-year mine life, producing nearly 100,000t of concentrate per annum at full production.
MLS is currently completing advanced metallurgical test work which will allow it to reach prefeasibility study (PFS) level “as well as carry out marketing of the high-quality and high-purity Lac Rainy graphite concentrate to end-users across North America and Europe”.
MLS also recently kicked off a 3,500m RC drilling program at its early stage Manindi lithium project in WA.
The program is expected to take 2-3 weeks to complete and will target the entire 500m strike length of the recently discovered Foundation Pegmatite.
NdPr prices hit US$100/kg for the first time in 10 years in November, helping Lynas Rare Earths (ASX:LYC) to a massive fourfold uplift in profit for the first half of 2022.
The $8.5 billion company produced a record net profit after tax of $156.9m, up from $40.6m a year earlier, with revenues climbing from $202.5m in H1 2021 to $314.8m in H1 2022.
EBITDA also rose from $80.6m to $189.8m, while Lynas has bucked inflationary trends hitting the mid-tier and large cap mining sector, with costs dropping from $150.8m in 2021 to $140.3m in the first half of 2022.
Prices have risen even higher since the start of the year, with NdPr oxide, the most valuable product sold by Lynas from its rare earths refinery in Malaysia, selling for over US$173/kg Thursday according to the Shanghai Metals Market.
Despite China increasing its rare earths mining and separating production quota by 20% against 2021 for the first half of 2022, Lynas boss Amanda Lacaze says the company is looking at ways to increase production to meet demand in a market the company says is very tightly supplied.
Lacaze said Lynas’ 2025 growth plan of increasing production 50% on 2019 levels will “clearly” not keep up with the market and Lynas is the largest supplier of processed rare earths outside the Chinese market.
“So situation is very tight and that means that all the existing suppliers, of course the Chinese but also Lynas, have a very simple crystal clear priority – grow as fast as possible,” Lynas VP downstream Pol Le Roux said.