Global Lithium (ASX:GL1) is the latest company to be hit by a downturn in global lithium prices (read: a massive ramp-up of supply and fading bullish psychology when it comes to EV demand.)
The company has announced it’s pausing its Definitive Feasibility Study (DFS) for the Manna lithium project; reducing corporate and overhead spend, and perhaps most telling, reducing its board size from four to three – a move to be confirmed at the company’s November AGM.
In turn, shares in GL1 were down -10.5% in the second half of lunchtime trades, falling to 17cps.
According to its announcement on Tuesday, it sounds like Global Lithium has been looking for a way not to make such a decision.
“The Company’s budgets and operations have been under constant review by the Board for some time, with protection of the balance sheet and capital assets uppermost in mind,” GL1 wrote.
“The expenditure reductions will ensure Global Lithium remains in a strong financial position to advance Manna in the future, when more favourable market conditions prevail.”
Whether or not lithium prices ever return to their former early-2020’s glory remains the multi-million dollar question hanging over the heads of dozens of lithium juniors across the country (let alone the world.)
While EV demand has definitely softened, the reality behind lithium’s stellar price boom in the early 2020’s was more of a stock-standard COVID supply chain shortage story. There just wasn’t enough to go around, and boom, Pilbara Minerals’ spodumene auctions became very hot property indeed.
But in the first half of this decade so far, we’ve seen incredible amounts of lithium supply brought online worldwide (and the removal of subsidies for EV purchases in China and the US.)
There’s now no real certainty that when the cycle comes around again, it will be quite as intense as those golden years not quite yet settled in the dust. It seems investment bank analysts can’t stop cutting price forecasts for the battery metal fast enough.
There is, perhaps, a disconnect between this unfortunate reality and an ASX still reminiscing over the gains we saw coming from the lithium sector – both at the level of GDP, and, individual returns.
Just look at the ongoing enthusiasm for lithium miners despite a collapse in commodity prices.
“Our focus must remain on protecting and enhancing value for our shareholders, which is why these tough decisions are now unavoidable. Nevertheless, the Company is in a robust financial position and is well placed to weather the current market conditions,” GL1 Chair Ron Mitchell said.
“We will continue to update shareholders as these matters progress.”
GL1 last traded at 17cps.