High Voltage: Recent history suggests the smart money is in battery metals IPOs
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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.
Debuting battery metals stocks have emphatically outperformed the wider IPO market this year.
Yesterday’s rocket, Lithium Plus (ASX:LPM), up 180% on debut, is just part of a wider trend in 2022.
Most of these stocks have also maintained those early gains — just look at recent debutantes NiCo Resources (ASX:NC1) +740%, International Graphite (ASX:IG6) +110%, Killi Resources (ASX:KLI) +52.5%, Firetail Resources (ASX:FTL) +50% and Lord Resources (ASX:LRD +50%. Who’s next?
Sediment hosted or clay lithium deposits — like that championed by punter favourite Arizona Lithium (ASX:AZL) (‘Big Sandy’), Lithium Americas (TSX:LAC) (‘Thacker Pass’) or Rio Tinto (ASX:RIO) (‘Jadar’) — are different to their better-known hard rock and brines counterparts.
For starters, there are no operating mines based on sedimentary resources yet; something that companies like AZL hope to change.
“Lithium rich clay deposits often form due of leaching of lithium from lavas, volcaniclastics and magmas by meteoric and hydrothermal fluids around sufficiently large eruptive volcanic systems to produce caldera lakes,” analyst Warwick Grigor says.
“The lithium enriched fluids then either precipitate out lithium salts or react with the clay rich sediments that accumulate within the caldera lakes to produce hectorite clay deposits.”
Grigor says clay deposits are promoted as having more favourable chemistry than pegmatites or brines.
“Just as nature has started the process of releasing rare earths from the original mineralogy of primary deposits, sedimentary lithium deposits are created when lithium is washed out of volcanic minerals into basins where it reacts with other minerals, creating chemical structures in which the lithium is bound up in a mineral, but much less strongly bound compared to spodumene,” he says.
“The lack of requirement to roast the sediment is an ESG positive attribute for these resources.
“As a generalisation you would expect sedimentary deposits to be lower grade than hard rock pegmatites, but mining and production costs should be cheaper.”
Weakening Chinese demand saw battery-grade lithium carbonate prices in Asia trend downward for the first time since September last year, Fastmarkets said late last week.
Multiple car makers, including Tesla and SAIC Volkswagen Automotive, suspended production of EVs due to the Covid-19 situation in China during early April.
Lower EV production = less demand for lithium.
“The mainstream lithium carbonate prices in the seaborne market are softening due to [the decreasing] Chinese prices,” a trader in Asia told Fastmarkets.
“Many downstream consumers, such as cathode materials producers, have enough stock, and they primarily rely on existing stock and supply secured through long-term contracts. They don’t have much demand for spot materials,” another Chinese lithium trader said.
Spot lithium prices in Europe and the US held steady over the past seven days, with most sources saying that buyers were trying to resist any upward movement and instead take a “wait-and-see approach” while consuming leftover inventory.
“I have noticed that buyers have been inquiring for lower volumes since the beginning of the [current] quarter and [they] are just waiting things out because there are expectations that the downward correction seen in China’s domestic market could spread overseas,” a lithium refiner and distributor source active in Europe said.
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.