Liontown Resources rises as it reports \u2018premium price\u2019 on maiden spodumene sale
\nRio Tinto sees small RBC upgrade after North American site visits, with Champion Iron also entertaining the sell-side in Canada
\nCanberra analysts, again, forecast sliding prices, but China stimulus sends iron ore back to US$110\/t<\/p>\n
It\u2019s been a rough time for lithium, but today\u2019s glimmer of hope comes from Liontown Resources (ASX:LTR)<\/a>, which nabbed a \u2018premium\u2019 price on the first shipment of spodumene from its Kathleen Valley lithium mine.<\/p>\n It\u2019s squeaky bum time for LTR, which spent ~$1bn building the Kathleen Valley mine in a tumultuous build that came in on time but went through a number of cost blowouts, an aborted $6.6 billion takeover by America\u2019s Albemarle (scotched by an interloping Gina Rinehart) and recut finance packages.<\/p>\n Tim Goyder-chaired Liontown eventually dumped its banking syndicate, some of whom pulled out when Wood Mackenzie went pessimistic on lithium prices, predicting market surpluses to later this decade, peaking at 26% of demand in 2026.<\/a><\/p>\n Instead it went to customers, who are still keen on high quality Aussie spodumene, to bankroll the final stages of construction, with Korea\u2019s LG tipping in US$250m ($379m) in convertible note funding in exchange for a 10-year offtake contract extension.<\/p>\n Today\u2019s first 10,000t shipment of 5.2% Li2O concentrate from the +500,000tpa Kathleen Valley, located near the town of Leinster in WA, will go to a Singapore-based trader at a 6% equivalent price of US$802\/t.<\/p>\n That\u2019s at a premium to the US$784\/t quoted by Fastmarkets on Friday. LTR is keen to enhance \u2018price transparency\u2019 by reporting transaction costs.<\/p>\n Few lithium sales terms have been made available publicly outside of sleuthing by price reporting agencies and a handful of miner-led auctions which have dried up this year as companies have failed to draw significant premiums from them.<\/p>\n Expected to begin supplying LG, Tesla and Ford in the coming months, LTR MD Tony Ottaviano said demand from customers for high-quality Australian lithium remained solid.<\/p>\n \u201cThe successful shipment of concentrate from Kathleen Valley is a pivotal moment for the Company. Over the past six years, Liontown has focused on developing and constructing a world-class tier-1 lithium operation, and now we announce the beginning of generating revenue and cash flow, as we see our plans come to fruition,\u201d he said.<\/p>\n \u201cWithin two months of first production at Kathleen Valley, we have not only successfully produced and now shipped concentrate, with a weighted average Li2O content of 5.2%, 6 but we have also achieved a sale on the spot market, realising a premium sales price in the current market conditions, and demonstrating the consistent demand for high-grade battery products.<\/p>\n \u201cThis achievement underscores the strong planning capabilities and operational excellence of our team but also the support from our Tier 1 logistics partner Qube.\u201d<\/p>\n \u00a0<\/p>\n It\u2019s always worth having a sceptical approach to broker upgrades when they follow site visits, where analysts have been wined, dined and schmoozed by the top brass of their covered miners.<\/p>\n But they\u2019re also instructive, bringing investors inside a world they don\u2019t normally get to see themselves.<\/p>\n Today it\u2019s RBC upping its price target on Rio Tinto (ASX:RIO)<\/strong><\/a> by $2 to $127 a share, though its stock has already run past that level, lifting over 15% in the past week due to the expected impacts of China\u2019s renewed stimulus push on iron ore and to a lesser extent copper.<\/p>\n RBC analysts led by Kaan Peker were up in the north visiting Rio\u2019s aluminium and titanium dioxide processing operations in Quebec.<\/p>\n Absent of commodity price changes, Peker et. al. say Rio will grow EBITDA and return on capital employed by 5% by 2030 in thew aluminium business.<\/p>\n That will see capex lift from US$1.4bn to US$1.7bn according to RBC estimates, with Rio chasing reductions in operating costs. RBC thinks the Pacific Aluminium assets in Queensland are higher in cost, modelling third quartile against Rio\u2019s guidance of second quartile.<\/p>\n But it sees the Canadian assets, powered by hydropower and moving to \u2018sector-leading\u2019 smelting technology called AP60 and Elysis, as world class.<\/p>\n The TiO2 assets are targeting to increase ROCE by 9 percentage points to around 15%, though RBC expects it will only rise to 11% by 2030 with production to return to historic levels of 1.2Mtpa by 2027, helped by an FID on a higher grade South African mineral sands deposit called Zulti South next year. Aluminium makes up 18% of group NAV and 15-18% of EBITDA on RBC\u2019s assessments, with TiO2 contributing 3% to each, both dwarfed by its iron ore and copper assets.<\/p>\n \u201cWe generally came back more positive on both segments, and post the site visits and company presentations have raised our EBITDA margin forecasts for both the Aluminium and TiO2 segments but note TiO2 is more market dependent on higher production and pricing, and lower costs, but we also lift capex,\u201d Peker and his fellow analysts wrote.<\/p>\n<\/div>\n Also cracking open the beers for Aussie sell-siders was Champion Iron (ASX:CIA)<\/strong><\/a>, which operates the high-grade Bloom Lake iron ore project in Canada.<\/p>\n Goldman Sachs analysts Paul Young and Hugo Nicolaci maintained their $7.60\/sh price target and buy rating for the magnetite mid-tier, though that valuation is based on long-run 65% Fe prices below current levels.<\/p>\n GS sees 30% EBITDA growth coming for CIA in FY26 with its doubling of Bloom Lake to 15Mtpa now complete, Young and Nicolaci think debottlenecking could enhance its capacity with the additional cash to 17-18Mtpa.<\/p>\n 8Mt of Bloom Lake product from H2 2025 could be upgrades to a direct reduction grade 69% Fe product, which will draw strong premiums from low-emissions steelmakers. The 9Mtpa Kami project is also a potential growth pathway, with GS anticipating the US$3 billion development could be possible by 2031 according to management.<\/p>\n It\u2019s not in GS\u2019 base case however, given a feasibility study will take 1-2 years and the introduction of a JV partner to the development is essential.<\/p>\n \u00a0<\/p>\n As far as the broader ASX mining and energy sectors are concerned the Chinese stimulus news continues to move the needle.<\/p>\n Singapore iron ore prices have lifted a quite ridiculous 10.6% today to US$113\/t.<\/p>\n They were sitting at US$89.45\/t not too long ago.<\/p>\n Today\u2019s Resources and Energy Quarterly out of Canberra estimates the value of Aussie iron ore exports will drop from $137.9 billion in FY24 to $106.9bn in FY25 and $98.8bn in FY26, consecutive falls of 22.5% and 7.6% YoY.<\/p>\n But it sees prices falling to US$80\/t next year and US$76\/t in 2026, well below the expectations of most banks and miners, who see the growth in marginal supply of the steel-making commodity in recent years setting a floor between US$80-100\/t.<\/p>\n After hitting a record $466.3bn in 2022-23 and an 11% drop-off to $415.16bn in 2023-24, the Office of the Chief Economist thinks the value of all mining and energy exports will slide 10.3% again to $372.4bn in 2024-25 and 4.9% to $354.1bn in 2025-26, with only substantive export earnings growth to be seen in copper and uranium.<\/p>\n Today\u2019s resources market was far more bullish, with the ASX materials sector up 1.76%, led by iron ore, lithium and rare earths stocks.<\/p>\n Energy companies were 2.61% up, with Woodside Energy Group (ASX:WDS)<\/strong><\/a> and Santos (ASX:STO)<\/strong><\/a> among the gains.<\/p>\n \u00a0<\/p>\n Spartan Resources (ASX:SPR)<\/strong><\/a> \u00a0(gold) +5.6%<\/p>\n Mineral Resources (ASX:MIN)<\/strong><\/a> (lithium\/iron ore) +4.5%<\/p>\n Liontown Resources (ASX:LTR)<\/strong><\/a> (lithium) +3.2%<\/p>\n Fortescue (ASX:FMG)<\/strong><\/a> (iron ore) +2.7%<\/p>\n \u00a0<\/p>\n Deep Yellow (ASX:DYL)<\/strong><\/a> (uranium) -7.3%<\/p>\n Genesis Minerals (ASX:GMD)<\/strong><\/a> (gold) -4.9%<\/p>\n West African Resources (ASX:WAF)<\/strong><\/a> (gold) -3.4%<\/p>\n Emerald Resources (ASX:EMR)<\/strong><\/a> (gold) -4%<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n<\/div>\n<\/div>\n<\/div>\n \u00a0<\/p>\n The post Monsters of Rock: Liontown bags \u2018premium price\u2019 on first lithium sales, and Rio entertains in Canada<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"RBC raises on Rio<\/h2>\n
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Champion sound<\/h2>\n
ASX resources continues to ride wave<\/h2>\n
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