Might #18 Global Lithium follow this proven path to West Australia spodumene riches? Greenbushes (Albemarle/Tianqi). Mt. Marion (Mineral Resources/Ganfeng). Pilgangoora/ Ngungaju (Pilbara). Finniss (Core Lithium). Mt. Holland (SQM/Wesfarmers). Kathleen Valley, Buldania (Liontown)
I participated in February in a virtual panel with Ron Mitchell, who I’ve known for many years from his days at Tianqi. But took greater notice when he moved from a non-executive director position to Managing Director and Global Lithium secured a cornerstone investment from one of my largest shareholdings, Mineral Resources. I’m not alone. Australian brokers large and small – Macquarie, Canaccord, Shaw and Argonaut Securities – have in quick succession initiated research coverage in recent weeks with price targets ranging from $2.30 to $3.10, while Global Lithium was also featured as a cover story in Paydirt Magazine.
We have undeniably entered a structural deficit for lithium. Current China spot prices are rising, as is the CIF Asia price. The best performing segment of the lithium market has been spodumene. The feedstock that Chinese converters lack. Chinese converters have seen their share of chemical operating margins eroded as market dynamics have transferred power back to the miners. This situation is likely to continue for years to come. RK Equity holds the view that the quickest route to increased lithium production from greenfield assets is spodumene and, ideally, DMS (Dense Media Separation) only. Low capex combined with shorter construction and ramp-up timelines and lower technical risk makes DMS the optimal solution for current and likely future tight market conditions. All projects are needed, and the use of floatation means higher recoveries but DMS for us is first prize. Another critical factor in time to market is permitting.
Here we believe that Western Australia has an advantage over other tier 1 jurisdictions. We are strong supporters of Canada and see the region as a key supplier to the USA and Europe in time, but for now, Western Australia has a more proven permitting track record. While Western Australia is experiencing a tight labour market, the local workforce is filled with the greatest number of seasoned hard rock mine operators. Lastly, all the largest hard rock resources are either owned by incumbents or have signed off-take agreements. Projects of meaningful size (40MT +) that have retained all or the majority of their future spodumene concentrate production rights are scarce and in high demand. Against this backdrop, we note Global Lithium Resources (GL1) as a project that possesses all these characteristics; namely: • Two main assets located in Western Australia with a probable future resource of greater than 40MT following an extensive 60,000m drill program (current 18.4MT). The company should release an updated resource in Q4 2022 or Q1 2023 • Experienced senior management – Ron Mitchell (ex-Tianqi sales director) and Chairman of the LME Lithium Committee • Mineral Resources (MRE: ASX) is a strategic shareholder (~8%) and is a likely future contractor.
MRE is not known for being a passive shareholder, which suggests they believe Global Lithium’s assets will be developed • The company has retained 70% of its offtake rights (30% Suzhou) • Signed an MOU with SK On Co Ltd with plans to develop a strategic relationship and possible downstream (value-added) collaboration • The company is forecasted to start production in 2026 using DMS only at the Manna Lithium Project and then add floatation at a later stage to boost recoveries – speed to market is enhanced by the proximity to existing infrastructure and technical expertise in Western Australian hard rock • As so many spodumene concentrate projects have signed off-take agreements or are considering a tolling arrangement, there is very little freely traded material available – could this result in long-term SC6 prices meaningfully exceeding $1,500/t? If so, what would a fair value target price be for Global Lithium if it’s currently around A$3.00 at $1,500/t SC6
GL1 Price at posting:
$2.67 Sentiment: Buy Disclosure: Held
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