Welcome to the October 2018 edition of the lithium miner news. This past month saw China spot prices fall and global contract prices remain steady. Most market participants see strong lithium demand ahead with a fairly balanced demand/supply outlook for H2 2018. All the lithium producers and near-term producers are steadily progressing well, despite the poor overall EV metals and stock market sentiment.
Lithium spot and contract price news
During October, 99.5% lithium carbonate China spot prices were down 1.27%. The chart below shows China lithium carbonate prices have fallen to $US11,720/t, and China lithium hydroxide prices also down to US$16,380/t. Global Lithium Carbonate Equivalent contract prices are steady, with SQM now expecting prices to remain flat in H2 2018 (previously they were expecting a slight fall).
Lithium China Spot and global contract prices
Source: Lithium Americas October 2018 company presentation
Lithium demand versus supply outlook
On October 11, Cobalt 27 published: "Cobalt 27 Q&A with Simon Moores, Managing Director, Benchmark Mineral Intelligence." A key quote was:
In Q1 2015, we had three battery megafactories in the pipeline according to Benchmark Mineral Intelligence’s Battery Megafactories Tracker – we were the only company at the time tracking these super battery plants. Today we are at 50 megafactories worldwide and have surpassed 1TWh of capacity in the pipeline. This is an incredible situation that is having a profound impact on the key battery raw materials of lithium, cobalt, graphite anode and nickel. It has ushered in a new era for 21st century commodities. Over half of this new capacity is located in China, with Europe emerging as the second most popular jurisdiction in recent years as Germany’s Auto OEMs seek cell supply security. 2018 has seen a record number of plants being announced with Benchmark Minerals’ latest data standing at 24 plants end-September. This could easily surpass 30 by the end of the year and we do not expect this battery arms race to slow down anytime soon. This shift energy storage both in electric vehicles and in ESS is a megatrend that will define the next 100 years.
Lithium market and battery news
On October 7, Reuters reported:
South Korea's SK Innovation to invest $354 million in EV battery parts plant in China. The plant will make separators for lithium ion batteries and ceramic coating. Construction is expected to begin early next year in the southeastern city of Changzhou, with production starting in the second half of 2020, the company said. SK Innovation currently runs a factory in South Korea that produces the materials, which ensure stability and bolster power output. In August, the firm said it planned to build an electric vehicle battery factory in China by 2019, under a joint venture with BAIC Motor and Beijing Electronics. It is also building a battery plant in Hungary....[and] is considering building an electric vehicle battery plant in the United States.
On October 15, Business Review EU reported:
EU to invest in the future of the auto industry with billions in funding for companies building electric battery plants. The European Union is planning to allow state aid for electric battery research and offer billions of euros in co-funding to companies who can build giant battery factories, similar to Tesla’s gigafactory in Nevada, according to the Financial Times.
The chart below is from Howard Klein's "Lithium-fueled Electrification: 15+ Year Mega Trend." Of interest is lithium is the only commodity listed below where the commodity price has gone higher in 2018 and the stock prices have gone lower. One would think something would have to give soon.
Another great chart, courtesy also of Benchmark Minerals and Lithium Bull.
Source: Lithium Bull
Lithium miner news
On September 27, Seeking Alpha reported:
Albemarle CEO foresees future as pure-play lithium market leader. Albemarle aims to eventually end its dependence on two smaller units to fund growth as global appetite surges for electric-powered vehicles and consumer goods, CEO Luke Kissam tells Reuters. ALB’s lithium earnings have jumped nearly 6x since 2014 to more than $500M annually and should significantly exceed 50% of corporate earnings by 2021, Kissam says.
On October 8, Reuters reported:
Albemarle shares drop after Chile rejects hike in lithium quota. The Chilean Nuclear Energy Commission (CCHEN) rejected Albemarle’s March request to increase its quota to sell lithium products by 258,446 tonnes, according to a Sept. 13 agency resolution obtained by Reuters via a Chilean freedom of information request. Albemarle spokeswoman Andrea Cole said CCHEN’s concerns are of a “technical nature” and that the company would re-submit its request “in the coming weeks,” hoping to resolve the issue.
Subscribers of Trend Investing can view an interview I did with CEO Luke Kissam here.
Sociedad Quimica y Minera S.A. (NYSE:SQM)
On October 4, SQM announced:
Antitrust court approves FNE/Tianqi agreement. SQM Sociedad Química y Minera de Chile S.A. informs that today the Antitrust Court, Tribunal de la Libre Competencia [TDLC], has resolved to approve the out of court agreement (reached by the Chilean Antitrust Regulator, Fiscalía Nacional Económica [FNE], and Tianqi Lithium Corporation (Tianqi), which was revealed on September 7.
On October 19, SQM announced:
Lithium carbonate expansion update. Sociedad Química y Minera de Chile S.A. informs about the lithium carbonate expansion in Antofagasta in Chile. In May 2018, we announced an ambitious strategic lithium expansion plan in Chile. This expansion is to be done in three phases, the first was to expand our production from 48,000 to 70,000 MT, in 2018. The second is to increase production from 70,000 to 120,000 MT, to be completed in 2019, and the third phase is to add an additional 60,000 MT of capacity to our operations, reaching a total of 180,000MT by 2021.
Lithium giant's wobble shows meeting demand growth not so easy. SQM is one of the oldest, largest and most profitable producers of the mineral used in rechargeable batteries for vehicles. On Friday, it revealed a five-week delay in a project to take annual capacity to 70,000 from 48,000 metric tons.
SQM’s lithium mine - Atacama Salar Chile
Investors can read the company's latest presentation here.
FMC Corp. (NYSE:FMC)
On October 11, FMC announced:
Livent celebrates IPO and first day of trading on New York Stock Exchange. Livent Corporation, a leading, global, fully integrated lithium company, opens for trading today on the New York Stock Exchange (NYSE) after its initial public offering. "We are pleased to welcome Livent to the NYSE," said John Tuttle, NYSE COO. "We congratulate Livent Corporation on this important milestone and are proud to join them in marking this exciting new chapter for the company and its shareholders." "Today marks an important achievement for Livent Corporation," said Paul Graves, chief executive officer of Livent. "We are honored to join the members of NYSE and look forward to the opportunities this creates for continued investment in Livent's long-term growth.
(Chengdu) Tianqi Lithium Industries Inc. [SHE:002466]
On October 25 4-traders reported: "Chilean Court Refuses Challenge to Chinese Firm's Purchase of Stake in Lithium Miner -- Update. A top Chilean court decided not to hear a lawsuit that sought to block a Chinese lithium producer from acquiring a stake in its larger rival, clearing the way for the biggest-ever deal in an industry that supplies the burgeoning electric-vehicle market."
Construction is ongoing at their Kwinana lithium hydroxide plant in Western Australia, and is expected to be finished in late 2018.
On October 4, Investing News reported:
Top lithium producer Ganfeng prices Hong Kong IPO at bottom of range, raising US$424 million. Last week, Ganfeng confirmed it had secured six cornerstone investors including Korean battery makers LG Chem (KRX:051910) and Samsung SDI (KRX:006400). In September, the Chinese lithium producer signed a deal to supply lithium hydroxide products for Tesla’s (NASDAQ:TSLA) batteries. The agreement is set to start in 2018 and run until 2020, but it could be extended by three years. The company also agreed to supply lithium to German carmaker BMW (ETR:BMW) for five years and inked a deal with LG Chem to almost double its supply of battery materials from 2019 to 2025.
Investors can also read my recent article - "Ganfeng Lithium Looks To Be A Great Buy."
Regarding Neometals, investors can read my article, "Neometals Offers Four Great Opportunities For The Price Of One," and my CEO interview here.
Investors can also read my article on International Lithium here.
Orocobre [ASX:ORE] [TSX:ORL] (OTCPK:OROCF)
On October 1, Orocobre announced:
Appointment of Chief Executive Officer and Managing Director Orocobre. Limited announced today that Mr Martin Perez de Solay has been appointed as the new Chief Executive Officer and Managing Director after an extensive global search by recruitment specialist Egon Zehnder. Martin will commence in these roles following the upcoming Annual General Meeting and a transition period with the current Managing Director and CEO.
On October 18, Orocobre announced:
Cauchari drilling update. Systematic brine sampling completed in CAU22 averaged 549 mg/l lithium and 3,630 mg/l potassium from 146.5–290.5m depth, with samples not yet received below this depth. The brine shows a similar grade and very low average Mg/Li ratio of 2.4:1, similar to that demonstrated during pumping of CAU11–excellent for conventional brine processing.
You can read the latest investor presentation here. Subscribers of Trend Investing can view an interview I did with ex-CEO Richard Seville here. Investors can read my recent article "An Update On Orocobre."
Galaxy Resources [ASX:GXY] (OTCPK:GALXF)
On October 18, Galaxy Resources announced: "Quarterly activities report three months ended 30 September 2018.: Highlights include:
"Mt Cattlin Operations
Production of 31,156 dry metric tonnes ("dmt") of spodumene concentrate.
Sal de Vida Project
"US$280 million less closing adjustments transferred by POSCO into HSBC escrow account, funds will be released to Galaxy upon receipt of the tenement transfer deeds by the Salta and Catamarca mining courts.
JP Morgan Australia process for potential strategic partnerships for Sal de Vida well progressed, with site visits completed and binding bids scheduled in early November from shortlisted bidders.
James Bay Project
Numerous studies supporting the Environmental and Social Impact Assessment (“ESIA”) process for upstream mine and concentrator completed with lodgment expected in early November.
Closing cash and liquid assets of US$68.0 million
Upcoming catalysts include:
- H2 2018 - POSCO deal should complete (bringing in US$280m to Galaxy)
- 2018 - Mt Cattlin resource upgrade. James Bay Feasibility Study.
- 2018/19 - Announcements to commence construction of Sal De Vida.
- 2020/21 - Sal De Vida production may begin.
Investors can read my article "Galaxy Resources Sal De Vida Project Is About To Be De-Risked After A Huge Cash Sale To POSCO, and my recent CEO interview here.
Alliance Mineral Assets Limited ("AMAL") [SP:AMS]/Tawana Resources (subsidiary Lithco) [ASX:TAW] (OTCPK:TWNAF)
On October 4, Tawana Resources announced:
Grant of ASX listing rule waiver for Tribeca funding package. Tawana Resources NL is pleased to advise that it has been granted a waiver from ASX Listing Rule 10.1 in respect of the $20 million debt facility (Tawana Facility) to be provided by a consortium of lenders led by Tribeca Investment Partners Pty Ltd (Tribeca). The waiver allows the Company to grant security to Tribeca without shareholder approval.
Altura Mining [ASX:AJM] (OTC:ALTAF)
On October 4, Altura Mining announced:
Loading underway for maiden lithium shipment. Altura commences loading of high-grade lithium concentrate onto vessel MV Clipper Tenacious. Maiden shipment will total approximately 5,000 dry metric tonnes. Shipment bound for Chinese based offtake partner Lionergy. High quality spodumene concentrate specifications being achieved, validating process plant performance. Altura continues to receive strong offtake interest with increasing demand from North Asia.
On October 9, Altura Mining announced: "Maiden lithium shipment departs Port Hedland. Altura Mining Limited is pleased to announce that the maiden cargo of spodumene concentrate from the Altura Lithium Project has departed Port Hedland."
- 2018 - Production ramp up.
Pilbara Minerals [ASX:PLS] (OTC:PILBF)
On October 1, Pilbara Minerals announced:
Loading of first concentrate shipment underway in Port Hedland. First product shipment totalling approximately 8,800t of >6% spodumene concentrate from Pilgangoora set to depart shortly, bound for customers in North Asia.
On October 16, Pilbara Minerals announced:
September 2018 quarterly activities report. Pilbara Minerals joins the ranks of global lithium producers with ramp-up of the Stage 1 Pilgangoora project on track and concentrate shipments underway; Stage 2, 5Mtpa DFS and Ore Reserve upgrade under scores Pilbara’s position as a major new player in global lithium raw materials supply.
- 2018/2019 - Production ramp up.
Investors can read my recent article "An Update On Pilbara Minerals."
AMG Advanced Metallurgical Group NV [NA:AMG] [GR:ADG] (OTCPK:AMVMF)
On September 24, AMG announced:
AMG Advanced Metallurgical Group N.V. completes first shipment of lithium concentrate. AMG Advanced Metallurgical Group N.V. is pleased to announce that the ramp-up and commissioning of AMG Mineração's first lithium concentrate plant is ongoing and the first shipment of commercial product to AMG's long-term offtake customer has been completed.
On October 16, AMG announced: "AMG Advanced Metallurgical Group N.V. completes feasibility study to expand spent catalyst processing capacity."
- H2 2018 - Production to begin at the Mibra mine in Brazil (initially 90ktpa).
- End 2019 - Stage 2 production (additional 90ktpa) to begin.
No news for the month.
Investors can read my LAC articles:
- H2 2018 - Pond construction and filling at Cauchari-Olaroz.
- 2019 - Cauchari-Olaroz plant construction.
- 2020 - Stage 1 Cauchari-Olaroz lithium production of 25ktpa.
- 2022 - Possible 2022 lithium clay producer from Thacker Pass Nevada (full ramp by 2025).
NB: LAC now owns 62.5% of the Cauchari-Olaroz project.
Investors can read my recent article "An Update On Lithium Americas."
Nemaska Lithium [TSX:NMX] [GR:NOT] (OTCQX:NMKEF)
On October 1, Nemaska Lithium announced:
Nemaska Lithium provides project construction update. Project construction at both sites currently on track with timeline and budget. Concentrate production expected to start in H2 2019 with lithium salts production expected in H2 2020. $272.4M or 31% of the total project budget has been committed.
Upcoming catalysts include:
- 2018 - Possible further off-take agreements.
- 2019 - Project construction.
- Q3, 2019 - Commence production and sale of spodumene.
- Q3 2020 - Plan to start lithium carbonate and hydroxide production.
Other lithium juniors
Other juniors include AIS Resources [TSXV:AIS] (OTCQB:AISSF), American Lithium Corp. [TSX-V: LI] (OTCQB:LIACF), Argentina Lithium and Energy Corp. [TSXV:LIT] (OTCQB:PNXLF), Argosy Minerals [ASX:AGY] (OTC:ARYMF), AVZ Minerals [ASX:AVZ] (OTC:AZZVF), Bacanora Minerals [TSXV:BCN] [AIM:BCN] [GR:1BQ] (OTC:BCRMF), Birimian Ltd [ASX:BGS] (OTC:EEYMF), Critical Elements [TSXV:CRE] [GR:F12] (OTCQX:CRECF), Dajin Resources [TSXV:DJI] (OTCPK:DJIFF), Enigri (private), Eramet (EN Paris:ERA) (OTCPK:ERMAY), European Metals Holdings [ASX:EMH] [AIM:EMH] [GR:E861] (OTC:ERPNF), Far Resources [CSE:FAT] (OTCPK:FRRSF), Force Commodities [ASX:4CE], Kidman Resources [ASX:KDR] [GR:6KR], Latin Resources Ltd [ASX: LRS] (OTC:LAXXF), Lithium Australia [ASX:LIT] (OTC:LMMFF), Lithium Power International [ASX:LPI] (OTC:LTHHF), LSC Lithium [TSXV:LSC] (OTC:LSSCF), MetalsTech [ASX:MTC], MGX Minerals [CSE:XMG] (OTC:MGXMF), Millennial Lithium Corp. [TSXV:ML] (OTCQB:MLNLF), Neo Lithium [TSXV:NLC] (OTC:NTTHF), NRG Metals Inc. [TSXV:NGZ] (OTCQB:NRGMF), Nemaska Lithium [TSX:NMX] [GR:NOT] (OTCQX:NMKEF), North American Lithium (private), Piedmont Lithium [ASX:PLL] (OTC:PLLLY), Prospect Resources [ASX:PSC], Rock Tech Lithium [CVE:RCK], Sayona Mining [ASX:SYA] (OTCPK:DMNXF), Savannah Resources [LSE:SAV], Standard Lithium [TSXV:SLL] (OTC:STLHF), Sigma Lithium Resources, and Wealth Minerals [TSXV:WML] (OTCQB:WMLLF).
The LIT fund moved down slightly for the month of October. The current P/E is 17.94. Given lithium demand should rise 3-6 fold between now and 2025 the lithium sector P/E of 17.94 looks very attractive.
Lithium & electric metals fund (ISIN DE000LS9L822) - Access via the Stuttgart stock exchange or wikifolio.com
The portfolio gives investors broad exposure across the EV metals miners covering lithium, cobalt, nickel, rare earths, and graphite. I help as an analyst for the fund. The certificate is endless (open fund) and listed on the Stuttgart Stock Exchange, so it can be bought via a broker that carries the ISIN or via Wikifolio. The ticker is DE000LS9L822 listed on the Stuttgart stock exchange and accessible from any German exchange.
Investors can view the portfolio holdings and learn more by accessing here.
Disclosure: I may receive 50% of the profit from the above fund.
October has been another tough month for the lithium miners despite solid news and fundamentals. Early November will see a number of lithium producers report Q3 earnings, which again should highlight the strong fundamentals of the sector. The US-China trade war and negative market sentiment has brought about some excellent valuation for buyers in the sector, especially given the massive lithium demand growth forecast the next decade.
My highlights for October were:
- Benchmark Mineral Intelligence’s Battery Megafactories Tracker – "We were the only company at the time tracking these super battery plants. Today we are at 50 megafactories worldwide. We do not expect this battery arms race to slow down anytime soon."
- South Korea's SK Innovation to invest $354 million in EV battery parts plant in China.
- EU to invest in the future of the auto industry with billions in funding for companies building electric battery plants.
- FMC spin-off Livent IPOs on the NYSE.
- Top lithium producer Ganfeng Lithium IPOs in Hong Kong at the lower end of the range.
- AMG Advanced Metallurgical Group N.V. completes first shipment of lithium concentrate.
- Nemaska Lithium - Project construction at both sites currently on track with timeline and budget.
As usual all comments are welcome
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Disclosure: I am/we are long NYSE:ALB, GANFENG LITHIUM [SHE: 2460], SE:SQM, ASX:ORE, ASX:GXY, ASX:PLS, TSX:LAC, ASX:AJM, ASX:EMH, TSXV:ILC, ASX:AVZ, ASX:LPI, ASX:PLL, ASX:SYA., TSXV:AIS, TSXV:WML, ASX:CXO, TSXV:PLU, TSXV:CYP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The information in this article is general in nature and should not be relied upon as personal financial advice.
I may receive 50% of the profit from the Lithium & electric metals fund's (ISIN DE000LS9L822) management fee, due to providing analyst services to the fund.
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.