Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
With lithium showing no signs of slowing, here are two broker picks
The current lithium boom is expected to continue well into next year, which bodes well for lithium miners and battery producers. S&P predicts that lithium supplies will push out into 2022, despite a prolonged semiconductor shortage which has constrained the electric vehicle market and its sales potential.
The seaborne lithium prices continue to rise on momentum in China filtering through to the wider regional market, and suppliers of battery-grade lithium are putting through aggressive offers. The Fastmarkets’ weekly assessment of the lithium hydroxide monohydrate 56.5% LiOH.H2O battery-grade spot price, was US$28-30 per kg on Thursday, up by $2 per kg. Lithium carbonate prices are at all-time highs, with some experts seeing them rising above US$40 a kg in 2022.
Canaccord Genuity has released a research report on electric vehicle materials. With the lithium price soaring, this bodes well for Lithium players.
Orocobre (ASX:ORE) – Cannacord has a “buy” recommendation with a target price of $12.00. While the Sep 21 Q showed production at Olaroz to be lower (quarter-on-quarter) due to seasonal impacts and a higher proportion of battery spec product, the Mt Cattlin spodumene (hard-rock lithium ore) operation in WA achieved a record production of 67,000 tonnes, versus the 53,000 tonnes estimate. Costs of US$351 a tonner were lower than forecast, versus the realised average price of US$779 a tonne.
Orocobre says the lithium carbonate sales price has more than tripled in the past year and guidance for the December quarter has been revised upward to US$12,000 a tonne free-on-board (FOB).
The research house says, “Looking into the DecQ, ORE has guided to higher pricing at both Olaroz (the brine-based lithium operation in Argentina) and Mt Cattlin, with market commentary remaining very positive (consistent with its views – see Lithium | 2H’21 recharge – Plaid acceleration) leading into CY22. While ORE has flagged that its growth projects remain on schedule, we look to the 1H CY22 for the release of a more detailed growth plan.”
Pilbara Minerals (ASX:PLS) – Canaccord has a Buy recommendation with a target price of $2.70. Production was up 11% QoQ on the back of higher processing rates. The miner says pricing will improve in the range of US$1,650-1800/t in the DecQ, up 80% QoQ.
Cannacord says, “FY22E production guidance remains unchanged with costs expected to be slightly higher through FY22E and FY23E, something we had already factored in. PLS also announced it. had signed an agreement with POSCO to form a JV for its downstream facility, which we see as a valuable long-term diversification move. Our target price (50:50 blend of NAV and five-year forward EBITDA multiple) increases on higher near-term realised pricing.”
