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https://www.theaustralian.com.au/bu...t/news-story/fb8b010fd8edab483e0d8fde6e25845c

China battery major BYD’s mine move powers lithium rout

Wednesday’s rout of lithium stocks appears to have been triggered by news from a Chinese-language publication suggesting Chinese battery major BYD is lining up the acquisition of six lithium mines in Africa, enough to supply its battery factories for the next decade.

• NICK EVANS
  RESOURCE WRITER
  
• 2 HOURS AGO JUNE 1, 2022

Is the bull run finally over for lithium stocks, amid talk of a new move by China Inc to take control of its own supply chain?

A single-day crash is not necessarily any long-term guide to value in the sector, but Wednesday’s lithium rout will have more than a few retail holders nervous.
A procession of brokers have been lining up to dampen the lithium excitement. Goldman said on Monday it expected a “sharp correction” in lithium prices over the next two years, followed by a similar bearish note by Credit Suisse on Wednesday.

But Wednesday’s rout of lithium stocks appears to have been triggered by news from a Chinese-language publication suggesting Chinese battery major BYD is lining up the acquisition of six lithium mines in Africa, enough to supply its battery factories for the next decade.
The report cites only internal sources at BYD, and gives no detail of the mines involved. But the report was still enough to send ASX-listed lithium plays tumbling.

Pilbara Minerals closed down 22 per cent to $2.30, with Liontown Resources off 19 per cent to $1.145, IGO down 11.7 per cent to $11.16, Allkem crashing 15.4 per cent to $11.60 and even MinRes down 8 per cent to $58.70 – adding up to the Australian lithium sector’s biggest single-day market rout.

It is entirely likely that major Chinese battery-makers are looking to capture their own sources of supply – such a move fits entirely within Beijing’s current resources strategy and mirrors current moves in African iron ore.
But a few of the details in the report suggest a bit of caution is also merited, not least the suggestion that BYD is eyeing six African mines with an average lithium grade of 2.5 per cent.
As a comparison, the head grade of the Greenbushes mine in WA has historically averaged 2.5 per cent to 2.8 per cent (excluding an ultra-high zone hovering around 4 per cent). It was averaging slightly above 2.4 per cent in the second half of 2020, according to part-owner IGO.

Greenbushes is still the tier one behemoth of hard-rock lithium mines, the operation to which all others are compared.

It is possible there are six deposits out there with a better average grade – but, if so, their owners have kept pretty quiet about it.

AVZ has for years been touting its Manono deposit as the best undeveloped lithium project in the world – at a grade of about 1.65 per cent. And it’s curious to note that talk of BYD’s move to buy mines crashed the prices of lithium miners and hopefuls, but similar recent talk by Tesla founder Elon Musk had pretty much the reverse effect, only adding to the market hype.

Still, while it would be easy to dismiss the unsourced BYD rumours as a moderately sophisticated effort to jawbone down the price of raw materials, there is no doubt that China Inc is on the march in Africa.
The fact that AVZ was forced on Wednesday to extend its suspension from trading suggests its bid to retain control of Manono in the face of a challenge from China’s Zijin is going to be a bit more difficult than the confident projections it initially gave shareholders.