Kidman’s lithium bet
In its first excursion into the world of corporate newsrooms, BHP Billiton’s commodities guru has dived into the impact that the rise of electric vehicles will have on future oil demand.
Don’t worry about oil demand, was the point, with lower but continuing growth in demand, and natural depletion of existing fields, putting ever increasing pressure on oil supplies and by extension, oil prices.
But today’s interest was in BHP’s estimates on the growth in electric vehicles and what that might mean for lithium given that for the foreseeable future at least, it is lithium-ion batteries that will be powering the growth.
BHP says in its “Prospects” blog that there is currently 1.1 billion cars in the world’s light duty vehicle fleet, of which about one million are electric vehicles. It estimates that by 2035, about 140 million of them would be on the roads, or 8 per cent of the total fleet of 1.8 billion.
All of that partly explains why the lithium space has been a hot one in the last couple of years. Add in lithium-ion batteries’ role in grid storage and no-grid storage of renewable energy, and it’s clear lithium has a bright future, notwithstanding the debate about whether the supply response will overwhelm demand at some point.
Canaccord Genuity has had a look at that issue and reckons that a slightly more aggressive supply-side response than it was expecting has impacted its medium-term pricing expectations. But it adds that the lithium sector is littered with examples of poor capacity utilisation, project delays and even failures.
“We highlight that any project delays/deferrals could see current tight market conditions (and prices) persist for longer than forecast,’’ Canaccord Genuity said.
It is against that backdrop that Kidman Resources (KDR) is expected this week to be confirmed as a major lithium player on the strength of its Mount Holland project near Southern Cross in Western Australia.
Kidman is already a $100m company thanks to the historical knowledge of widespread lithium-bearing pegmatites at Mt Holland, a former gold producer. And the results from its own first holes have produced 100m-type intersections of good grade. Kidman went into a trading halt of Friday pending the release of its drilling results.
If the results come in anything like it hopes for, analysts will be doing their own back of the envelope resource estimates, and it won’t be any surprise if Mount Holland gets rated as a seriously big lithium deposit.
How that will impact Kidman’s value — it last traded at 32c a share — remains to be seen.
What is known is that the combined market capitalisation of Pilbara Minerals (PLS) and Altura (AJM), the two companies that share the already confirmed seriously big Pilgangoora lithium deposit on the Pilbara, currently stands at a coo l $830m.
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