Quiet lithium boom unfolding in WA as global forces take hold

14th July 2017
Tim Treadgold

“Gold cooling. Other metals warming up.” Six words from Deutsche Bank which succinctly described events on the Australian stock market this week.

The only additional comments required to round out that snappy description being that gold bounced back a little in late trading, and lithium was the star, yet again, of the “other metals” category.

For some investors, the lithium story can be hard to grasp, partly because it’s happening so quickly, partly because they have seen unusual metals come and go in the past, and partly because events are not just local, they’re global.

Locally, the big lithium events were Altura Mining’s latest off-take agreement with a Chinese customer which largely accounts for the bulk of production from the first stage of its Pilgangoora project, clearing the way for funding to be finalised, and the arrival in Australia of Chile’s lithium giant, SQM.

Internationally, the big lithium events were an announcement from the French Government that it proposes to ban the sale of petrol and diesel cars from 2040, a plan by Sweden’s one-time vehicle leader (but now Chinese-owned) Volvo to only make electric or electric-hybrid cars from 2019, and the launch of first mass-produced all-lithium-electric Tesla 3 model.

What’s happening in lithium is a boom. It might not be a big boom yet, but from a standing start of one lithium mine (Greenbushes) two years ago, WA alone could soon have eight lithium mines – all riding a wave of worldwide demand for a metal essential in long-life, rechargeable batteries.

SQM, a name unfamiliar to most Australians is a big fish in the lithium pond, but it is also a company caught up in Chile’s socialist background, where a government economic development agency issues quotas for lithium production – a system which is stifling expansion of production from the brine lakes high in the Andes Mountains.

Australia’s hard-rock lithium, such as that to be produced in SQM’s new joint venture with Kidman Resources, will be quicker to market than Chilean brine, and though it is likely to be costlier to produce, it is available now, just when battery makers want lots more.

Investors late to the lithium party have time to jump aboard because the electricity revolution is just beginning and SQM’s entry is proof that Australia has what the world wants, and a mining climate willing to provide what’s required.

It wasn’t all lithium this week as this run-down of news flow and market-moving events demonstrates:

  • Graphitecorp, which is changing its name to Novonix, traded up to a 12-month share price high of 95c yesterday as interest grows in its battery and electric vehicle exposure. At its latest price, the stock has effectively doubled in five years, with 25c of the rise coming over the past two weeks.
  • Altura and Kidman, the two lithium stocks making the most noise this week, had mixed fortunes with some investors taking the chance to sell down as the good news flowed out. Altura added 1c to 15.5c, but did trade up to 16.5c on Tuesday and is now up 3c for the month. Kidman opened the week with a bang, rising from 62c to 77.5c before easing back to around 61c. Sometimes it really is better to travel than arrive.
  • Metals X was the best of the copper-exposed stocks with a rise of 6c to 75c after reporting encouraging assays from drilling at its Nifty project in WA, including an eye-catching 161 metre core grading 1.7% copper from a shallow start at 19m. Other holes confirmed the thickness and grade with the widest being a 209m hit at 1.3% copper from 19m.
  • Vimy Resources shook off widespread negative sentiment towards uranium with 2.5c share-price rise to 19.5c on Wednesday after upgrading the resource base at its flagship Mulga Rock project, though the price eased back later in the week to 17.5c.
  • Plymouth Minerals added 2c to 22c after reporting encouraging sylvite and carnalite (ores of potash) assays from its Banio project in the African country of Gabon.
  • Northern Star defied the “gold cooling” comment from Deutsche Bank by reporting record gold production and free cash flow in the June quarter, backed up with a modest 12c share price rise to around $4.74, an increase aided by the late recovery in the gold price.
  • Artemis Resources also shrugged off the negative gold sentiment with a sharp share-price rise of 2.8c (44%) to 9.3c after reporting the recovery of visible gold nuggets from the first bulk sample at the company’s Purdy’s Reward prospect in the north of WA.
  • Pantoro reported a 14% increase in gold production to 11,828 ounces in the June quarter from its Nicolsons mine in WA’s Kimberley region, good enough to lift the company’s share price by 1c to 24.5c.
  • Red River Resources saw its shares rise by 1.5c to 24c after reporting solid progress on the redevelopment of the Thalanga zinc project in north Queensland.
  • Resolute Mining crept up 1c to $1.14 after announcing that gold production in the year to June 30 had exceeded guidance and the outlook for 2018 was strong, with at least one investment bank, Macquarie, getting excited about the performance with a buy tip on the stock and a 12-month price target of $1.90.
  • Kairos Minerals reported high-grade cobalt mineralisation at its Roe Hills project, including 4m at 0.39% cobalt, plus nickel and manganese. The market reacted moderately, lifting the stock by 0.2c to 1.6c.
  • Universal Coal, one of the Australian miners working in South Africa’s coalfields, saw its shares rise to a 12-month high of 19c on Monday after announcing expansion plans to its Kangala colliery, before slipping back to be up half-a-cent over the week at 17.5c. And,
  • Catalyst Metals added 3c to 51c after reporting “best-ever” gold intersections at its Four Eagles prospect, which is part of the Whitelaw gold project north of Bendigo in Victoria. Assays included 27m at 22.3g/t and 22m at 31.1g/t – exactly one-ounce to the ton using the old imperial gold measuring standards

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