Lithium powering the few Christmas stars after bleak year for commodities
The Australian
December 18, 2015 12:00AM
General Mining is sporting a 4428 per cent annual gain.
The best placed to enjoy Christmas this year are those lucky enough to have had last year’s Santa sock stuffed full of lithium explorers/developers.
In a year that has been nothing short of disastrous for the mining sector because of the meltdown in commodity prices and open antipathy from investors, lithium stocks have been the shining lights — except for one, Orecobre (ORE).
It is the biggest by market capitalisation and lost one-third of its value during the year due to it taking much longer than everyone thought it would to get its project in Argentina up to speed.
But that’s it. All others in the sector — it is not all that big just yet with a combined market capitalisation across the better known ASX players of about $820 million — had major gains, ranging from 133 per cent right up to 4428 per cent, if you don’t mind.
The best performed was the blandly named General Mining Corp (GMM). Owned 18 per cent by long-time mover and shaker in the junior resources, geology economist Michael Fotios, GMM was a late entrant into the buzzing world of lithium.
Lithium is buzzing because of the excitement building around the uptake of rechargeable lithium-ion batteries in electric bikes, electric cars, and in the home/off-grid battery storage space. Elon Musk’s Tesla has been capturing the headlines with his “insane’’ electric cars and solar-fuelled home battery storage packs.
But Tesla is far from alone in believing that given where battery technology currently sits, it is lithium-ion batteries that are set to fundamentally change the way the world uses energy. (Local graphite stocks like Syrah (SYR) couldn’t agree more, given graphite too is found in lithium-ion batteries).
As noted by Euroz in a recent initiation of coverage research note on GMM, industry consensus is for annual demand growth of 10 per cent out to 2020. Double digit demand growth just doesn’t exist elsewhere in the commodities space.
“Given the early stage of adoption of multiple technologies driving significant lithium demand (vehicles and electricity storage) it is hard to estimate demand growth with great accuracy, however all forecasts are positive and support the current positive (price) outlook for lithium and spodumene (a hard rock lithium mineral used to produce lithium carbonate),’’ Euroz said.
In the past couple of months at least that has certainly been the case, with lithium carbonate prices rocketing 70 per cent higher to $US10,000 a tonne, remembering that prices for spodumene concentrates capture only part of that.
Still, you would be a spodumene producer today if you could be, or even better, a producer from lithium-bearing brines, the world’s major source of the metal and the lowest cost source if it is done right, which is not always a fait accompli, as Orecobre’s experience to date has shown.
Now every structural shift upwards in demand for a commodity has a corresponding supply response. Lithium will be no different, so the would-be new producers of the stuff would want to get cracking before their window of opportunity is slammed shut, sometime around 2020 by most accounts, if not earlier.
