Battery metals begin bounce back amid hopes of a Biden-led boost for EVs

A “blue wave” in US politics could become a “green wave” for Australian investors with early signs of a significant recovery developing in the battery metals sector of the stock market.
23rd October 2020
Tim Treagold

A “blue wave” in US politics could become a “green wave” for Australian investors with early signs of a significant recovery developing in the battery metals sector of the stock market.

Despite another 11-days of campaigning before the US Presidential election on November 3, early bets are being placed on lithium, nickel and graphite miners in the hope that the Democrat contender, Joe Biden, defeats Donald Trump.

Biden’s policies are explicitly aimed at promoting electric cars (EVs) and other low-pollution technologies which could significantly boost demand for a range of new-technology metals and reduce demand for oil.

Hints of a battery-metal comeback were evident at last week’s Diggers & Dealers forum in WA’s gold capital, Kalgoorlie, but they were lost in the enthusiasm for gold and the prospect of more mergers to match that of Northern Star and Saracen.

Gold remains an investor favourite, aided by a surge in the price back above $US1900 an ounce, but there is also concern that the gold boom has peaked with leading investment bank, Morgan Stanley warning that downside risk is developing

Adding to the case for battery metals is the latest news from Tesla, the world’s EV leader, which reported its fifth straight quarterly profit and remains on track to sell 500,000 vehicles this year.

Locally, the best performing lithium stocks were Pilbara Minerals, which added 4c over the week to trade at 41c with sales at 43c on Wednesday, the top price for the year. Galaxy added 8c to $1.33 and Liontown moved up 1c to 28c after releasing a positive scoping study into downstream processing at its Kathleen Valley project in WA. In New York, the world’s top lithium producer, Albemarle, rose by $US3 to $US95.87, a few cents short of its 12-month high.

Nickel stocks, arguably the biggest winners from the EV revolution, had another good week. Mincor put on 10c to trade at a fresh 12-month high of 98c. Western Areas did better, adding 22c to $2.38, while Independence, which is struggling to decide whether it’s a gold or battery metals company, lost 2c to $4.36.

Nickel Mines, the Australian-based but Indonesian-focused investor in nickel processing technologies, had another good week, rising by 14c to an all-time high of $1 with Canaccord Genuity tipping a future price of $1.60.

Talga, which has emerged as the graphite stock most likely to succeed thanks to its operational location in Sweden, rose by 8c this week to a 12-month high of 96c. The stock is up 75c (350%) since mid-June.

Syrah, once the graphite leader, remained under pressure during the week, shedding 2c to 48c, though another way of looking at the stock is to see the latest price being 33c higher than the year’s low point of 15c reached in the Covid-19 panic of mid-March. UBS updated its Syrah research after noting that there was “rebalancing of the graphite market on the horizon”. Credit Suisse see 70c as a price target but warned that “recapitalisation looks needed”.

Iron ore miners largely held their ground in the face of persistent reports that Chinese steel production has peaked, and Brazilian exports are rapidly rebuilding. Fortescue Metals added 11c to $16.72, but was trading as high as $19.30 in August. Mineral Resources slipped 34c to $24.92.

Quarterly reports, which are starting to flow for the three months to September 30, might throw more light on the battery metals sector with J.P. Morgan giving nickel stocks a boost during the week with a long-term price tip for nickel of $US8 a pound, up 12% on the current price of $US7.14/lb, the highest for 11 months.

Morgan Stanley, in an EV sector update, reiterated its preference for nickel as a battery winner with the EV share of the vehicle market tipped to rise from 3% to 26% by 2030. Copper, manganese and lithium will follow nickel, but cobalt is likely to be “thrifted out” of battery chemistry.

Another highlight of the commodity sector this week was the annual Metals Week round of events organised by the London Metal Exchange with the once vibrant round of presentations and celebrations reduced to Zoom meetings and virtual seminars.

Despite the missing human element, Macquarie Bank was able to conduct its annual straw poll of delegates, reporting that copper is the base metal most likely to do best next year with aluminium least likely.

Most delegates, according to Macquarie, have a “glass half full” view of commodity markets with 52% expecting the global recovery to continue, albeit at a slow pace, while 24% expect a stronger recovery and a miserable 4% reckon there’ll be a double-dip recession.

Citi, which also took the pulse of Metals Week, gave silver a huge boost with a remarkable forecast for the metal to rise by more than 60% over the next 12-months to sell for $US40/oz, with a technical analysis pointing to a possible price of $US50/oz and an extreme possibility of silver rising all the way to $US100/oz.

Gold, as mentioned earlier, had a solid week with a rise of $US19/oz to $US1913/oz but did rise as high as $US1930/oz on Wednesday thanks largely to US political uncertainty which is leading to volatile trading conditions with more twists to come before the Presidential election.

News from the gold mining sector was generally positive with one significant negative, a 7c fall by Resolute Mining to 87c after the surprise departure of the company’s long-term chief executive, John Welborn. Resolute has had a disappointing year thanks largely to its focus on mining in difficult African countries such as war-torn Mali.

The flipside of troubles at Resolute included solid quarterly production news from gold producers such as Saracen (154,388oz at an all-in cost of $A1169/oz), and a new phase in the long-running battle for control of Cardinal Resources, with Russia’s Nordgold upping its offer price to $1, matching the price of China’s Shandong.

Other newsworthy and market moving events included:

  • Lynas Corporation led the way up in a revitalised rare earth sector, adding 19c to $2.88 after UBS told clients that the stock was “positively exposed to EVs and China’s (restrictive) trade policy”. The bank has lifted its price target on Lynas from $3 to $3.40.
  • RareX, an emerging player in the rare-earth business, did not fair as well, slipping 3c lower to 13c despite reporting exceptionally wide and high-grade drill results from its Cummins Range project in WA with a best hit of 90 metres at 3.8% total rare earth oxides.
  • Thor Mining rose by 0.7c (46%) to 2.2c after reporting visible gold in stream sediment samples at its Pilbara project in WA.
  • Nexus Minerals rose by 3c to 17c on the strength of encouraging assays from drilling at its Wallbrook project in WA with a best hit of 12m at 5.04 grams of gold a tonne from a depth of 39m.
  • Genesis Minerals said drilling at its Orient Well gold project near Kookynie in WA had returned extensive near-surface assays as high as 8.24g/t over 5m from a depth of 35c, and 2.18g/t over 9m from 16m. On the market the stock added 1c to 9.1c, and
  • Venturex Resources rose by 2c to 12c after reporting receipt of additional mining approvals for its Sulphur Springs copper, zinc and silver project near Port Hedland in WA.













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