RIU Explorers Conference: 3 ASX stocks give us the scoop on China's influence, prices, and the biggest challenges in 2023

Towards the end of 2022 exploration stocks spent a record $1.07 billion hunting for lithium, nickel, copper, and a multitude of other commodities in a September quarter that eclipsed the record expenditure set 10 years earlier during the height of the China-led mining and investment boom.

Market commentators say we are on the cusp of a “very different” commodity super cycle as the world continues to transition away from coal fired generation, towards a greener energy mix.

While this puts the pressure on ‘critical minerals’ as a whole – copper to build power grids, rare earths for the permanent magnets vital for EV motors and wind turbines, and nickel and cobalt for batteries – some commodities are going to feel the pinch more than others.

Lithium challenges unlike other battery metals

Ian Stockton, associate partner at CSA Global Mining Industry Consultants, told investors at the RIU Explorers Conference in Perth yesterday the supply and exploration challenges lithium miners face is unlike other battery metals.

“Lithium has limited recycled liberal resources, so we can’t recycle our way out of the shortage,” he said.

“And existing lithium production is limited to a few mines that previously produced specialty metals, meaning lithium production needs to catch up with current demand, which can only happen through exploration.

“The exploration for LCT pegmatites is different to other booms as the knowledge base is new to the broader exploration community therefore, the learning curve for geologists in the field is steeper – which is also quite exciting,” he added.

Stockhead sat down with three explorers to get a gauge for whether China’s economy will continue to play a big factor in the lithium market, where prices will go, and the biggest challenges facing companies in 2023.

MATSA RESOURCES (ASX:MAT) – executive chairman Paul Poli

Market cap: $15.24m

Will the health of China’s economy continue to play a big factor in the lithium market?

That is really interesting, it is my understanding that China is 1/8^th of the world’s population, so they can affect 1/8^th of demand for lithium.

If you then look at GDP, their GDP is lower than most countries, so while the health of China is important their actual internal demand for lithium isn’t as strong a factor but we must get out of the habit of thinking lithium is cars … it is more than cars.

Will lithium prices stabilise in 2023?

My thoughts are that lithium demand will not decrease in the next few years, in fact I think demand will continue to increase substantially.

In Australia for example, less than 2% of the cars are battery – I can see a future where 20 or 30% of the cars are battery. Therefore, there is a lot more lithium that needs to be produced to go into batteries and sustain that type of volume.

Then there’s house batteries and industry batteries.

If demand is increasing, and no substantial new supply coming onto the market, on that basis alone, I can’t see how lithium prices will fall – I can only see it at best remaining where it is.

You’ve found two new lithium provinces in Thailand recently. Do you think this is a potential ‘frontier’ type discovery?

Are we a frontier? Absolutely we are a frontier company for lithium in Thailand. The good thing about it is, we are not isolated. We have access to railway lines that links us directly to lepidolite processes in China.

So sure, we are a frontier in a country, but all the infrastructure we require is there.

I would say that if you are a lepidolite discoverer in Australia, you are stranded. You’re a frontier company.

We have just beaten the masses; the discoveries we have made have been there for centuries. We just happen to be the first company that’s decided to look in the area and make a discovery.

ZENITH MINERALS (ASX:ZNC) – executive chairman David Ledger

Market cap: $79.13m

Will the health of China’s economy continue to play a big factor in the lithium market?

No because I think the US and Europe are really moving quite quickly in the critical mineral space and we are in discussions with people on both sides of the Atlantic.

China has had a dominance in rare earths and certainly in the lithium space but others are going to catch up and aren’t going to be left behind.

They will still dominate because they have a dominant position today but you’ll find that the central governments of Europe and the US are going to have to keep pace and they are all talking about critical metal supply.

Will lithium prices stabilise in 2023?

I think they will stabilise because there is still immense demand, there’s limited supply, and overarching all of that is governments driving the change towards a greener economy.

Whilst there might be fluctuations in the price, you are going to see long-term demand supply being outweighed.

What are some of the biggest challenges mining companies face in 2023?

Costs are going up, but this affects all companies whether you’re small or big, it doesn’t matter.

The cost of development is a big challenge as well as the costs of drillings but it makes things harder when you’re a smaller company and need to preserve capital.

Costs for things like building a concentrator – smaller companies are going to have to face the challenge of those construction costs, which can be prohibitive.

This is why we might see consolidation in the sector – demand is there, but can we get it out quick enough?

What is your main focus for 2023?

We are focused on drilling out our assets, the only thing that speaks to the market is results.

We have an exciting pipeline, we are drilling extensively at Split Rocks and getting some results back, we’ve have had some good hits at Warratah Well. We think we could direct ship that ore out to Geraldton to bring in some cash flow and it’s important that we do generate some cash flow.

In the past we had a lot of different assets but we have to focus on what we can deliver and projects we earn 100%.

SAYONA MINING (ASX:SYA) – finance manager Dougal Elder

Market cap: $1.86bn

What are some of the biggest challenges mining companies face in 2023?

Following on from COVID, there is still a huge impact on supply chains in terms of the ability to get equipment and materials to where it needs to be quickly.

Capex costs are rising, construction costs are blowing out, and timelines are blowing out but our strategy of buying a brownfields asset at North American Lithium has paid off because we have delivered that on time and on budget.

Who are the main challengers to the lithium-ion battery?

From what I understand, the LFP battery is the chemistry of choice but all battery chemistries have lithium in them.

We think being in the lithium space is a good space to operate in and there’s quite a supply gap at the moment between where demand is and global supply.

Quebec is going to have a big role to play in closing some of that supply gap, it’s a mining province with good infrastructure, a good resource base and access to local talent, but there are also some other advantages with Quebec.

Access to hydroelectricity is one (our factory will be powered by clean, cheap, hydropower) and proximity to the US is another.

Quebec is just across the border from the US which means lower freight costs, and lower emissions from freight versus, say, shipping from South America into North America, or vice versa.

From an ESG perspective but also from a cost perspective, being in Canada is a good position.

LG Chem has come out and said it wants to start securing its own raw materials. That’s a big deal.

It was a significant move – there’s been a lot of announcements from OEMs and battery makers with a huge growth pipeline of gigafactories being built in the US so those batteries will all need supply.

Again, being positioned in Quebec we are very close to those batteries, just across the border.

Our strategy is all about having that localised supply chain in Quebec from mine through to processing through to chemical completion – that is what our strategy is, to produce those battery chemicals to feed the likes of LG and others in North America.

At Stockhead we tell it like it is.While Matsa Resources is a Stockhead advertiser, they did not sponsor this article.