If there is one thing to come out of the commodity market this year, it’s the sheer strength and unstoppable force of the lithium price as countries around the world accelerate their transition to a cleaner, greener economy.

End-user demand for lithium related products, such as electric vehicles and battery storage, has driven the lithium price through the roof with market analysts changing their long-term forecasts for lithium carbonate from US$7,500 – $10,000 per tonne at the start of 2022 to US$15,000 – $25,000 per tonne towards the pointy end of it.

Luke Laretive, CEO of Seneca Financial Solutions, says the bullishness of the sector has essentially doubled over the course of the year.

“This is the real highlight and on the back of that change in sentiment is obviously businesses such as Pilbara Minerals who are making exceptional free cash flow,” he says.

“This activity – whether it’s the free cash flow in the businesses or change in the longer-term assumptions that analysts are making, is really going to drive what takes place next year.”

 

Lithium outlook: what’s in store for 2023?

While the money has been with the producers and near-term developers this year, Seneca believes the real opportunity in 2023 will come from identifying the businesses that will progress through the most meaningful, value-accretive milestones next year.

In Laretive’s view, this progress is most likely among the discounted, longer-timeframe developers who aren’t forecast to be in production until 2025 or 2026.

These stocks might re-rate as investors gain greater confidence on the company’s ability to make it into production.

“After the initial resource discovery and definition, the next big opportunity for investors to make extraordinary profit is definitive feasibility, financing, and final investment decision,” he says.

“This is where the long-run value of the business can be determined with a high degree of certainty – it’s unlikely the valuation differential will persist.”

Could 2023 be the year of lithium M&A?

For example Core Lithium (ASX:CXO) and Argsoy Minerals (ASX:AGY) are trading around $4,000 EV/resource tonne because they are going into production next year, he says.

Vulcan Energy (ASX:VUL), on the other hand, is much cheaper – trading on a ridiculously low EV to resource base at $65 and all going to plan, will be in production by late 2025/early 2026.

“Another major opportunity next year for investors in this sector is M&A,” Seneca explains.

“There’s major uplift to be had for companies that have low forecast operating costs, large scale resources and face high upfront capital projects,” Seneca explains.

“The acquiring companies will be those who are already benefiting from the high prices and generating large amounts of surplus cash.

“They have an opportunity to acquire top-tier undeveloped projects while they trade at huge relative discounts – this is where value can be unlocked simply by changing ownership, leveraging off the balance sheet of a larger business and lowering the cost of capital.”

The top lithium 10 stories of the year: a quick recap

1. Every single lithium stock with a market cap ~$15m and under. You’re welcome.

There’s a collection of advanced lithium stocks nearing production, all of which have bagged multiple times over the last year, and probably won’t produce enough to satisfy ever-increasing demand from the EV sector.

So, where’s the rest the of lithium coming from?

We give you the skinny on those lithium stocks with room to run.

 

2. Battle to a Billy: Which ASX lithium stock will be next to hit the $1bn market cap?

Stockhead put the question to our readers back in April 2022 – Which ASX lithium stock do you think will be the next to reach $1 billion market cap?

Many of you tipped Arizona Lithium (ASX:AZL), with Argosy Minerals (ASX:AGY) and Galan (ASX:GAL) coming in close second and third place.

We highlighted five stocks that could be the next in line.

 

3. Ignoring shouts, world’s second biggest miner dives headfirst into lithium

Back in July Rio Tinto (ASX:RIO) signed a deal with motor giant Ford for a “significant lithium off-take agreement” from its recent US$825m acquisition in the Rincon project in Argentina.

But it’s not the only attempt the miner has made to search for lithium amid strong local community opposition.

 

4. Could one of these stocks be the next Pilbara Minerals?

Which ASX lithium stock is set to become the next profitable mid to large cap producer?

We tapped the brains of experts in the field to see who they believe stand a good chance.

 

5. The ASX’s next lithium carbonate producer is a couple of months away from ‘lucrative’ cashflows

In early November Argosy revealed its 2,000tpa Rincon lithium carbonate project in the Salta Province of Argentina is almost ready to go, with operation development works and plant commissioning 98% and 86% complete, respectively.

Continuous lithium carbonate operations are now scheduled for next quarter.

 

6. Bargain Barrel: Do these 7 advanced ASX lithium stocks have room to run?

Stockhead pulled out seven potential near-term miners (scoping level or better) under a $300m market cap, which, for whatever reason, haven’t quite taken off yet.

Some examples include Jindalee Resources (ASX:JRL), Anson Resources (ASX:ASN), and Infinity Lithium (ASX:INF).

 

7. Belles of the ball: Four lithium stocks power into S&P/ASX 300

The S&P/AXS 300 is re-balanced semi-annually, in March and September and is a significant index used as a cutoff for investments by many fund managers and investors.

Entering the index can be a major milestone for companies, signifying they have entered the major league and further boosting share prices.

Five lithium companies made the cut, but which one got the boot?

 

8. PLS banked an extra $8.5m this quart- Oh wait… PLS banked an extra $8.5m every day this quarter

Pilbara Minerals more than doubled its cash balance from $591.7m to $1.375 billion in just three months to September, a radical $783.7m increase in a touch over 90 days.

At the same time, the miner bucked a trend of inflation and escalating costs across the sector, with unit costs coming down from US$462/dmt or $648/dmt in the June term to US$434/dmt or $635/dmt, at the lower end of its $635-700/dmt guidance range for 2022-23.

9. This is why Pilbara Minerals boss Ken Brinsden believes miners will keep winning the lithium boom

Former Pilbara Minerals boss Ken Brinsden is now the non-exec chair of Canadian-based ASX lithium explorer Patriot Battery Metals.

At an investor conference in April, Brinsden said it would take a long time before demand destruction sends prices down to normal levels with the underinvestment from battery and carmakers in mined supply sending the margin down to the digger.

 

10. Canaccord mining analyst disagrees with Goldman Sachs — ‘lithium supply always disappoints’

Lithium prices across the board have gone parabolic since the bull market kicked off in January 2021, but a bearish Goldman Sachs research report — plus news that a China co is buying six lithium mines in Africa to feed automaker BYD — brought it all to a halt for a short period of time there.

In the report, analysts over at Goldman claimed although the long-term prospects for the battery metals remains strong due to the rapid uptake of electric vehicles (EVs), investor enthusiasm has led to an oversupply.

Cannacord mining analyst rebutted these accusations hard and you all loved reading about it – “that oversupply in the market that Goldman Sachs is referring to is in lithium production from China lepidolite sources which is lower grade, difficult to process and more expensive to process in comparison to spodumene.”

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