Tech Metals: These explorers have cash in the bank to ride out any short-term market volatility
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COVID-19 is a ‘black swan’ event impacting already glum battery raw materials markets. Longer term, market fundamentals for lithium, graphite, cobalt, nickel (and the rest) remain positive — but miners and explorers still need cash to navigate any short-term uncertainties.
Graphite producer Syrah Resources (ASX:SYR) — which curbed production pre-virus in Q4 2019 to match market demand — is the latest ASX-listed company to suspend full-year 2020 guidance.
“Risks to the international mobility of personnel and the free movement of supply chains have elevated as countries increasingly enact border controls, travel restrictions and quarantine requirements,” it told investors.
“In addition, with consideration of potential near-term demand and supply shocks due to COVID-19, the company is observing a degree of market and operational uncertainty beyond Q1 2020.”
Importantly, Syrah says its “balance sheet is well positioned to navigate these near-term uncertainties”.
While ASX-listed explorers aren’t directly exposed to prevailing low prices they still need to raise money to keep the lights on.
Advanced lithium brines play Lake Resources (ASX:LKE) will have a few million in the bank after completing a share purchase plan (SPP) on March 13.
In January, Lake soared after confirming that a disruptive lithium brine processing tech from California-based Lilac Solutions worked really well at its projects.
In February Lake jumped again — this time when a fund led by American software magnate Bill Gates invested $US20m into Lilac.
Good timing, it appears. Yesterday, Lake said that “no significant scale back of SPP applications is anticipated at this stage”, but another update would be provided once the withdrawal period closed.
US-based Jervois Mining (ASX:JRV) is essentially hitting pause on financing and off-take discussions.
The Idaho Cobalt Operation (ICO) bankable feasibility study (BFS) is almost complete, but the company will now delay its release “pending further customer off-take negotiations”.
These discussions have also been impacted, particularly in Japan and South Korea where travel has been restricted to date in 2020. Jervois says it will continue to prepare and dispatch physical concentrate samples to additional markets and is engaging with customers remotely.
The company is now confirming capital and operating costs, which will be part of an updated financial model for release to potential lenders in early April.
The positive — Jervois has about $8.15m in cash to ride out volatility over the short-term.
“Jervois will move forward with securing ICO project financing, including the IE review, and has sufficient cash to continue its operational footprint and plans well into 2021,” the company says.