Brinsden rides BMX to a record, Ioneer secures a quality partner deal as lithium shortage hits home

Plus, Boss positioning to be first cab off the uranium rank and Kingston prepares to finish DFS on 2.5Moz Misima
16th September 2021
Barry FitzGerald

It has been a champagne week for the ASX-listed lithium sector.

The first-up boost for the sector came from Pilbara Minerals (PLS), courtesy of the spectacular price achieved in the second auction of spodumene concentrate on its newbie online platform, the Battery Material Exchange (BMX).

Then there was Ioneer (INR) securing $US560 million ($A765m) in backing from South Africa’s Sibanye-Stillwater for its Rhyolite Ridge lithium-boron project in Nevada.


Pilbara knocked the lithium industry’s socks off when it reported in July that the first sale from its BMX site attracted a top bid of $US1,250/t for 5.5% material - effectively $US1,400/t for material at the benchmark grade of 6%.

It followed that up this week with a second sale at $US2,240/t, again for 5.5% material, or the equivalent of $US2,500/t for 6% material.

Both the first and second auction realisations are staggering, remembering that 6% material averaged about $US480 a tonne in the 2021FY, a level at which the WA hard rock producers struggled to turn a dollar.

No one is suggesting that $US2,500/t should now be plugged into earnings models for the spodumene producers, not yet anyway. But the BMX result does highlight that convertor capacity additions in China have outstripped concentrate supply.

There is no point having a shiny new plant to convert concentrates into higher-value lithium hydroxide/carbonate if you don’t have contracted supply. The spot market is the salvation for many caught short.

It is why that so far in the 2022FY, spodumene prices have averaged more than $US900/t.

Lithium hydroxide/carbonate prices have also taken off (40% and 46% higher respectively in the last three months) as EV numbers take off in China and Europe, with the US coming hard and fast around the corner.

That means that even at the new elevated prices for concentrates, the converters’ margin is being preserved.

So they will pay up to get the stuff, even at a spectacular $US2,500t on a new trading platform called the BMX if need be.

Having created the BMX, Pilbara stands to benefit big time. It is now ramping up the mothballed Altura operation it acquired for a song to 200,000tpa from the first half of next (calendar) year.

That material will be available to the spot market while Pilbara’s adjacent Pilgan operation continues to pump out material at an annual rate of 380,000tpa.

Assuming concentrate prices hold at something north of $US1,000/t, the earnings impact is going to be huge. It is why Pilbara has gone from being an 87c stock at the start of the year to $2.34 this week for a market cap of $7.2 billion.


Ioneer (INR) has delivered in a big way on its earlier promise to find a strategic partner before September was up for the $US785m development of its Rhyolite Ridge lithium/boron project in Nevada.

Its deal with the $US10 billion Sibanye-Stillwater (SS) involves SS paying $US490m at the joint venture level for 50% of the project and pumping $US70m into Ioneer itself in a strategic share placement.

SS set out to build a battery materials business two years ago and has already secured a position in lithium and nickel refining in Europe, where the EV market is growing hand over fist.

Rhyolite Ridge gives it a presence in the US market, with the $US10 billion company telling investors last month the lithium was the key metal in the battery space and that future demand would dwarf current production.

At Rhyolite Ridge, it gets to share in a project that because of its boron leg, was forecast in the BFS to be the lowest-cost producer of battery-ready lithium carbonate/hydroxide in the world at $US2,510/t.

That compares with current prices of $US18,000-$US20,000/t, and the $US13,000/t flat price used in the BFS.

Dilution around the project selldown and the placement to SS at the 10-day average price was met by Ioneer shares falling 14c or 18% to 60c. That’s still ahead of the 54c level when the stock was mentioned here recently because the September deadline for a strategic partner was looming.

No issues with that first-up market response, even if it missed the bigger point of the SS deal. And that is, how many world-scale (and scalable) lithium projects out there that have secured a pathway to finance completion as Ioneer has done? Are there any others?

As sexy as lithium has become in a decarbonising world, traditional project financing is not available and what can be secured comes with so many bells and whistles it is not worth doing.

The SS deal is as vanilla as they come and was struck as close to the NPV metric as could be expected for a company of Ioneer’s size. And to the relief of the company’s shareholders, an equity raising from them is now highly unlikely.

The remaining $US300-$US350m funding required will be met with debt, possibly with soft dollars coming from government-backed sources keen to reduce the country’s dependence on China for battery material supply.

First production – once the final permits are in place – is possible around 2024, just in time to benefit from that yawning supply gap that SS and others reckon is on its way.

As a side issue, first production from Rhyolite Ridge is now likely years ahead of Rio Tinto getting its lithium/boron project production in Serbia into production. It too will have boron keeping its costs of production super-low.

Rio is a boron producer in the US and it dominates the global market with production from Turkey. So Rio’s knowledge of the market – demand grows in line with GDP – is obviously deep.

It is also deep at SS and Ioneer as both companies have former Rio executives on their boards who were involved in the Rio boron business. Handy insights there, for sure.


It has also been a champagne for uranium, with the (spot) price for the nuclear fuel taking off to a 9-year high of $US48.55/lb.

It is kind of neat to be talking about a champagne week for the lithium and uranium sectors as both have key roles to play in the world’s decarbonising efforts.

Having said, most commentary around uranium’s price hike centres around physical purchases on the spot market by the Sprott Physical Uranium Trust (SPUT) which is being upsized from $US1 billion to $US1.3 billion.

SPUT is now holding around 15% of one year’s global demand. It is significant all right, but hardly represents a cornering of the market.

The bigger thematic of the world’s utilities having to step back into the contract market, where prices can be 20% higher than spot, for their long-term requirements remains.

The physical buying by SPUT is in expectation of that scenario delivering the $US60/lb-plus prices needed in the long-run to encourage investment in new mines as the availability of spot material eventually dries up.

The alarm bell on all that was rung by Boss Energy (BOE) boss Duncan Craib in early August at Diggers & Dealers. Boss – which has been a physical buyer of uranium itself - was a 17c stock at the time. It is now 34c.

“All of the indicators we are seeing currently point to the start of a new (price) cycle. When the commodity price moves it can be sudden, it can be violent,” Craib said at the time.

“As they say, the longer the base, the higher the space. Prices can and have gone ballistic (previously at any rate).”

Like what was said earlier in the lithium yarn, there is no point watching the uranium price take off if a company can’t capitalise on the upswing by being ready to get into production.

Boss is getting ready to go with a restart of its Honeymoon project in South Australia where it has just appointed a contractor for some early works.

The Sprott group’s equity desk likes the story. It has a 40c price target on the stock on the assumption of a $US60/lb uranium price arriving.


All the excitement around lithium and uranium means the gold stocks have been struggling to gain attention.

But there is an upside to that in that the value proposition for the gold stocks against a near $US1,800/oz gold price has continued to improve.

Kingston (KSN) is an example. It has just upgraded the indicated resource at its Misima project in PNG to by 39% to 2.5 million ounces.

Plonk that in outback WA and the company would have a market cap measured in the hundreds of millions. But at its 19.5c share price, Kingston’s market cap is all of $55 million.

Normally, a PNG discount would seem fair enough.

But Misima was once the jewel in the crown for Placer Dome with serious annual production at super-low cost.

The locals on the island know mining and would rather be working at a restarted project there rather than jetting off to work at other PNG mines, COVID permitting.

The upgraded resource estimate will underpin a DFS into Misima Mark II, due to be released in March next year.

An earlier PFS pointed to the potential for annual production of 130,000oz at an average AISC of $A1,159oz – a cost base most mines in WA would love to achieve.

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