I'm looking forward to seeing how the off take/s play out for the Lithium DSO. We will make some nice margin on the processing and cartage but there could be considerably more margin to be made through the selling price of the DSO.
A string of recent big-ticket lithium investments by Chinese groups could well be the start of deal-making frenzy across the sector.
In the week before Christmas, Chinese duo Tibet Summit Resources and NextView Capital agreed to buy Canadian lithium producer Lithium X for $C265 million ($269.5m), just days after NextView also shelled out £31m ($53.7m) for a 19.9 per cent stake in London-listed lithium play Bacanora Minerals.
Bacanora, which is planning to develop the Sonora lithium project in Mexico, has Australian connections through executive chairman Mark Hohnen and chief executive Peter Secker.
Speaking to The Weekend Australian, Mr Hohnen said the company had been inundated with interest from Chinese groups and international carmakers interested in getting hold of lithium, a key ingredient in the batteries underpinning electric vehicles and energy storage systems.
“Back in the 1920s, Henry Ford couldn’t get enough rubber for his T-Models, so went and bought up Malaysian rubber forests. I think we’re going to see a bit of that happening,” he said.
“There’s not an auto manufacturer that hasn’t at some stage been in contact.” Australia’s Pilbara Minerals, which is developing the Pilgangoora lithium project near Port Hedland in Western Australia, recently signed the first lithium offtake agreement with a carmaker when it struck a deal with Chinese giant Great Wall Motors.
Under that deal, Great Wall has bought a 3.5 per cent stake in Pilbara for $28m and has committed to buy a large chunk of Pilgangoora’s output for up to 15 years. Bacanora was advised on its recent deal with NextView by Perth-based boutique Ashanti Capital.
Ashanti managing director Rob Hamilton said the growing Chinese appetite for lithium deals — and the willingness to make big upfront payments to put their foot on supply — was reminiscent of the height of the last boom.
“Their thirst to secure supplies of lithium at the moment is actually not dissimilar to what was happening in iron ore back in ’08,” he said.
“If you are a Chinese battery manufacturer that needs to secure supply, you’re going to need to write cheques. And that’s something that we’re now starting to see.” Mr Hamilton said he believed that the flow of deals would only accelerate in the new year.
“This is just the start of it. I think you will see in 2018 an enormous amount of activity, largely directed by China,” he said.
A wave of new lithium operations are expected to come on line in the new year, led by the likes of Pilbara Minerals and its neighbour at Pilgangoora, Altura Mining. Tawana Resources and Argosy Minerals are also closing in on first production.
Brisbane-based Orocobre, recently said it expected prices for the lithium carbonate from its Olaroz project in Argentina to increase 25 per cent in the first half.
AGO Price at posting:
3.1¢ Sentiment: Buy Disclosure: Held
