Some lithium stocks have already peaked and plateaued in the global race for battery metals, but Jevons Global‘s founding partner Kingsley Jones argues the demand drivers show no signs of abating.
Speaking to The Market Herald for the latest Thematica report, Still in the Lead: Lithium’s Place in the Green Energy Transition, he said there was a ‘solid higher trend for growth’.
“As people would be aware, lithium prices went very high last year and then they’ve come off maybe as much as 50 per cent or more,” he said.
“But the risks are these little hiccups along the way when you’re trying to grow an industry so fast.
“So just be aware that you don’t want to be shaken out of a good company simply because the market is volatile.”
He said companies may have rallied because they’d completed early-stage project development. They may have mapped out the size of their resource, determined the metallurgy and ‘there may be a slow burn ahead’.
“Pilbara Minerals (PLS), are already there in the sense that they’ve been producing for a while,” he said.
“Obviously investors now would be missing that early stupendous uplift that we saw when they moved from being an explorer. But they still have significant production growth opportunities … they’re looking quite hard at doing further value add in Australia.”
Another example he mentioned was Liontown Resources (LTR) and the Kathleen Valley hard rock lithium deposit.
“Obviously that’s a really great resource and they’re making progress in bringing that into production,” he said.
“The stock’s price now, of course, is going sideways because we’ve seen such a big rally.”
NYSE-listed Albemarle had attempted to acquire Liontown more than once, in April its offer valued the company at $5.5 billion.
“I think Liontown did the right thing in saying ‘no’,” Mr Jones said.
“We think there’s further upside in Liontown, but it might be a bit quiet until they’re producing.”
He said once a company was producing it was a matter of appraising future growth potential.
Mr Jones tipped other key lithium players could include Wesfarmers (WES) with the Mt Holland lithium operation, but costs had blown out.
“That’s the thing I’ve warned about in Australia,” he said, “we are a bit of a high-cost environment.”
He said companies may look to companies including Thailand and Vietnam for downstream processing.
“For Australian companies to be effective and to do well in this space, they don’t necessarily have to have their plant in Australia,” he said.
“We’re starting to see some activities in places like Thailand and Vietnam and not only in lithium, also in rare earths and other areas.
“There may be some plants start up in Australia, which would be a good thing. I think the thing we need to be cautious of, though, is whether their cost structure will be really set right to be competitive.
“So if they’re doing that, they probably want to be competing more at the high end.”
As for smaller caps in Australia, he said that companies assaying for gold in greenstone country, including the Pilbara, could be sitting on valuable hard rock lithium resources.
Mr Jones mentioned Kairos Minerals (KAI), Kalamazoo Resources (KZR) as well as TSE-listed Novo Resources, which is preparing to list on the ASX next month. All three have gold and lithium projects in the region.
Disclaimer
This article contains information and educational content provided by Jevons Global Pty Ltd, a Corporate Authorised Representative (AR1250727) of BR Securities Australia Pty Ltd (ABN 92 168 734 530) which holds an Australian Financial Services License (AFSL 456663). The Market Herald does not operate under a financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given.
The information is intended to be general in nature and is not personal financial advice. It does not take into account your personal financial situation or objectives and you should consider consulting a qualified financial professional before making any investment decision. All brands and trademarks included in this report remain the property of their owners.