Goldman says Aussie lithium stocks have run ahead of the fall in spot prices as it tips surplus to keep prices muted in 2024 and 2025
\nANZ more bullish, flagging 2025 carbonate recovery with price falls \u201coverdone\u201d
\nWA1 $60m cap raise and uranium stocks charge on Kazakhstan tax hike<\/p>\n
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The big lithium miners have outrun another bearish take on the battery commodity from persona non grata Goldman Sachs.<\/p>\n
All of the major lithium producers \u2013 Pilbara Minerals (ASX:PLS)<\/strong><\/a>, IGO (ASX:IGO),<\/strong><\/a> Mineral Resources (ASX:MIN)<\/strong><\/a> and Arcadium Lithium (ASX:LTM)<\/strong><\/a> \u2013 were well in the green today.<\/p>\n It came despite a warning from Goldman\u2019s Hugo Nicolaci, Paul Young and Isaac Brooke that nearly all had outperformed their underlying commodity price for 9-18 months, with \u201congoing fundamental weakness\u201d behind its belief there will continue to be near term weakness over the second half of 2024 and all of 2025.<\/p>\n \u201cWe see further lithium raw material supply rationing continuing to be needed to reduce both the 2024E surplus and larger surplus in 2025E,\u201d Nicolaci and his colleagues wrote in a note.<\/p>\n \u201cHowever, with lithium spot prices still sitting near the top end of the integrated cash cost curve (dominated by Chinese lepidolite (US$8k-12k\/t LCE) and integrated production using African concentrates (US$7k-13k\/t LCE)), and above the incentive price for Australian spodumene projects (~US$400-800\/t), combined with many lithium producers remaining reasonably well capitalised, we have yet to see meaningful volumes come out of the market or new projects get deferred.<\/p>\n \u201cIn fact, while the timing of some new growth projects is slipping vs. prior company targets (though still remain ahead of our supply estimates), new projects continue to be proposed (i.e. PLS\u2019 \u2018P2000\u2019), or progressed (i.e. SGML\u2019s Grota do Cirilo (Brazil) which took FID to double spodumene capacity in early Apr-24).\u201d<\/p>\n The progress of DLE projects that could bring brine output online faster in South America has added to concerns the supply glut will take a while longer to clear, while Goldman noted lithium auctions conducted by big miners in the hunt for \u2018price transparency\u2019 has pulled in progressively lower outcomes relative to published spot prices.<\/p>\n When the lithium market was on a tear between late 2021 and 2022, auctions like PLS\u2019 Battery Material Exchange sales were drawing prices well above spot levels, in turn pushing up the price of contracted spodumene concentrate sales for WA mines.<\/p>\n \u00a0<\/p>\n Goldman\u2019s analysis shows auction prices have struggled to outperform spot markets like they used to. Pic: Goldman Sachs research note<\/p>\n \u00a0<\/p>\n According to GS, Aussie lithium stocks are pricing in an average price of US$1100t spodumene \u201cthough with further near-term commodity downside, in our view,\u201d Nicolaci et al<\/em> noted.<\/p>\n \u201cLTM is the most sensitive producer to a change in lithium prices on longer-dated growth, while CXO is the most sensitive to lithium prices (once high enough to restart the mine).\u201d<\/p>\n MinRes is the highest priced stock on their estimation, its market cap implying US$1200\/t SC6. CXO and PLS sit at US$1170\/t and US$1165\/t respectively, with Liontown Resources (ASX:LTR)<\/strong><\/a>, the next producer to enter the market at its freshly refinanced Kathleen Valley mine, at US$1050\/t, Arcadium at US$1060\/t and IGO at US$950\/t excluding the growth to come from its soon to be commissioned CGP3 expansion at the Greenbushes mine.<\/p>\n Goldman assessed spot prices at US$1030\/t.<\/p>\n Goldman\u2019s long term real spodumene price sits at US$1150\/t (nominal US$1333\/t), but it expects to see far weaker levels until a 2027 rebound of US$995\/t this year, US$800\/t in 2025, US$978\/t in 2026 and then US$1155\/t in 2027.<\/p>\n Its long term chemical price is US$15,500\/t, though if prices stay that low for that long (including hitting US$800\/t spod and US$11,000\/t for carbonate next year), supply growth could well wane.<\/p>\n GS is buy rated on IGO with a $7.15 price target (23% upside), but sell rated on PLS ($2.60, -14%), MIN ($47, -17%) and neutral on LTM ($6.35, +28%), LTR ($1.15, +22%) and Core ($0.08, -9%).<\/p>\n \u00a0<\/p>\n ANZ\u2019s Soni Kumari and Daniel Hynes were more bullish in a note today, saying the supply overhang is \u201cnot that large, and the fall in prices looks overdone\u201d.<\/p>\n They see US$16,000-18,000\/t for carbonate by next year.<\/p>\n \u201cA strong supply response to the recent collapse in the price of lithium is setting the stage for a market rebalancing, but a sustained recovery is unlikely until overcapacity in the supply chain for lithium batteries is reversed,\u201d they said.<\/p>\n \u201cThe persistently weak price is prompting lithium producers to apply fiscal discipline. High-cost miners and processors are likely to exit the market and other producers will either reduce or defer investments.<\/p>\n \u201cGiven this, supply adjustments are likely. Lithium mine and refined supplies are concentrated in a small number of countries. Australia and Chile dominate the upstream markets, while China controls 70% of the downstream market.<\/p>\n \u201cThis makes lithium and battery supplies vulnerable to country-specific risks. Demand for lithium to support the electrification of the transport sector remains strong.\u201d<\/p>\n The latest Fastmarkets price report listed carbonate at US$12,750\/t, hydroxide at US$11,850\/t and spodumene at US$965\/t, the latter down US$10\/t on Wednesday.<\/p>\n Hynes and Kumari say prices would need to be higher to stimulate more production outside the China supply chain if tariffs on Chinese imports promised by both the Biden and potential Trump administrations come into play after this year\u2019s US Election.<\/p>\n \u201cDisruptions in supply from China of lithium\u2019s chemical form would mean lithium or lithium-ion batteries will need to be sourced from somewhere else,\u201d they said.<\/p>\n \u201cThis shift will take time and come with additional costs. China\u2019s production of refined lithium sits in the lower quartile of the cost curve, compared to the rest of the world.<\/p>\n \u201cTo stimulate an increase in production outside China, such as in Chile or Argentina, prices would need to be high.\u201d<\/p>\n ANZ estimates a surplus of less than 25,000t LCE, 1.4% of global demand, though new projects will increase supply in 2025. But they believe with pricing below some miners\u2019 production costs, they are close to bottoming out.<\/p>\n \u00a0<\/p>\n And now to niobium, where WA1 Resources (ASX:WA1)<\/strong><\/a> has followed to release of an inferred mineral resource at its Luni niobium discovery in WA\u2019s West Arunta region of 200Mt at 1% Nb2O5 with a cap raise.<\/p>\n The $60 million raise at $17 a share led by Canaccord and Bell Potter will be put towards drilling, met testwork and permitting among other things.<\/p>\n \u201cThis Placement will support the Company\u2019s efforts to increase momentum and continue to unlock the full value of the Luni discovery. The strong demand from new and existing institutions around the world reflects the quality of the recent Mineral Resource estimate, its tier-1 location and the significant potential for future growth,\u201d WA1 boss Paul Savich said.<\/p>\n \u201cTwo drill rigs are currently operating at Luni to increase confidence in, and extend, the Mineral Resource, along with providing further samples for metallurgical testwork. This placement will also allow the Company to accellerate its project development workstreams and expand exploration activities across the greater tenement package.\u201d<\/p>\n The firm ended the June quarter with $47m in the bank and spent around $5.5m on exploration and evaluation in the past quarter.<\/p>\n The find, which includes a high grade core of 53Mt at 2.1% Nb2O5, has been touted as the first significant discovery in 70 years the near monopolistic niobium market, presenting an opportunity for Australia to break the reliance of customers on a single dominant miner in Brazil.<\/p>\n Other explorers have made discoveries or pegged land in the vicinity, including recent darling Encounter Resources (ASX:ENR),<\/strong><\/a> 2023 listing CGN Resources (ASX:CGR),<\/strong><\/a> Norwest Minerals (ASX:NWM)<\/strong><\/a> and mining giant Rio Tinto (ASX:RIO).<\/strong><\/a><\/p>\n While the cap raise discount cut up WA1\u2019s share price, the broader materials sector lifted 1.2% on a solid trading day.<\/p>\n Tin baron Metals X (ASX:MLX)<\/strong><\/a>, owner of 50% of Tasmania\u2019s iconic Renison Bell tin mine, rose 3.5% after announcing it had taken a 23% stake in London-listed First Tin, which owns the 138,000t Taronga project in New South Wales.<\/p>\n Uranium stocks surged on news the world\u2019s largest producer Kazakhstan would dramatically increase tax rates in a complex tiered system that could see some production hit with royalties of more than 18% depending on the scale of an operation and uranium price.<\/p>\n Most of the biggest winners were in the yellowcake space today.<\/p>\n \u00a0<\/p>\n Deep Yellow (ASX:DYL)<\/strong><\/a> (uranium) +9.2%<\/p>\n Silex Systems (ASX:SLX)<\/strong><\/a> (uranium)\u00a0 +7.9%<\/p>\n Paladin Energy (ASX:PDN)<\/strong><\/a> (uranium) +6.2%<\/p>\n Boss Energy (ASX:BOE)<\/strong><\/a> (uranium) +6.1%<\/p>\n \u00a0<\/p>\n WA1 Resources (ASX:WA1)<\/strong><\/a> (niobium) -9.4%<\/p>\n ioneer (ASX:INR)<\/strong><\/a> (lithium) -3.6%<\/p>\n Alumina (ASX:AWC)<\/strong><\/a> (alumina) -1.8%<\/p>\n Yancoal Australia (ASX:YAL)<\/strong><\/a><\/strong> \u00a0(coal) -1.7%<\/p>\n The post Monsters of Rock: The big bear take on lithium<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"What happens this quarter?<\/h2>\n
Point and counter-point<\/h2>\n
WA1 gets the green<\/h2>\n
Today\u2019s Best Miners <\/strong><\/strong><\/h2>\n
Today\u2019s Worst Miners\u00a0<\/strong><\/strong><\/h2>\n