April 11th, 2022 | 19:00 CEST
Lithium explosion: BYD, Standard Lithium, Edison Lithium - Explosives for e-mobility!
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Lithium becomes a bottleneck factor
Many powerful batteries are needed against the continuing high global demand for e-cars. As a result, just about every automaker is planning with its own specifications on how to handle battery procurement. BYD, VW, Daimler and Tesla already have their gigafactories or are currently planning them. Lithium is one of the essential raw material components of a battery, along with nickel, cobalt, graphite and copper. However, the available production volumes on the markets are limited. According to Benchmark Mineral Intelligence, the deficit is expected to increase from the current 26,000 tons of lithium carbonate to more than 80,000 tons in 2024. That means prices for the white metal will remain high, and the search for new resources will have to be accelerated.
Standard lithium - Things could start happening here soon
The top dogs among the producers are able to satisfy some of the current additional demand by expanding their mining sites and are earning handsomely as a result. Further gaps could be filled in the future by explorer Standard Lithium (SLI), which is still under construction and is implementing a major lithium project in the US state of Arkansas. Significant investment in the plant has been underway since 2021, and production is scheduled to start in 2023/24. The Canadians' flagship project is named "Smackover." Here, brine has been mined in southern Arkansas for over 60 years to extract bromine and other minerals. Standard Lithium, with the help of the German Lanxess Group, is now focusing on lithium. With its direct lithium extraction (DLE) technology, it is currently a global leader.
After the impressive rally and the subsequent correction, the SLI share still has a 185% price gain on the clock after 12 months, and the capitalization is currently at a high of EUR 1.17 billion. The advance laurels are enormous, as are the reactions to doubts and rumors as recently in some short attacks against the Company. Negative coverage came most recently from Hindenburg Research and sent the share to a temporary low of EUR 4.80. After a successful denial by management, the share price exploded again to just under EUR 8.20. Stifel Research rates the stock as a "Buy" with a price target of CAD 13 or EUR 9.48. Buy only in weakness!
Edison Lithium - Further progress in Argentina
The largest lithium deposits on earth are found in South America and Australia. The big producers like Albemarle, Livent, SQM, and Allkem are located here. However, the high-tech industry needs more deposits to counter the shortage of raw materials because lithium remains one of the most important raw materials for the mobility revolution and copper.
At lithium and cobalt explorer Edison Lithium Corp. (EDDY), there is news about the Salar Antofalla and Salar Pipanaco lithium concessions in Argentina. In November 2021, an environmental impact assessment report was submitted to mining authorities in Catamarca, Argentina, for the prospecting phase of exploration. It involves 24 claims covering an area of approximately 100,000 hectares. The work plan includes topography, mapping, geophysical surveys using TEM methods and sampling. Assay results for claims #29 and #30 indicate the presence of a potential brine zone with a thickness of at least 300 meters. It must now be drilled to determine the grades and qualities.
Mining Minister Maria Fernanda Avila recently told Fastmarkets in London, "President Alberto Fernández and the provincial governments are clear about their commitment to accelerate the country's lithium resources development. Nathan Rotstein, CEO of EDDY, commented, "Argentina is currently in the spotlight for lithium discovery. We are working quickly and effectively to identify potential lithium resources to capitalize on the growing demand for lithium chemistry in the dynamic EV sector."
In addition to its investment in Argentina, the Company also owns a historic cobalt project in Ontario, Canada, with gold, nickel, copper, lead, and zinc deposits. EDDY shares are trading at CAD 0.13 in Canada and are also listed in Germany. With a market capitalization of only EUR 11 million, investors can still invest favorably here in the future market of "battery metals".
BYD - The signs continue to point to expansion
"Build Your Dreams" (BYD) continues to step on the gas! The sales figures for March prove this! For the first time, the Chinese manufacturer sold more than 100,000 e-vehicles, including plug-in hybrids. That corresponds to almost a fourfold increase compared to the previous year.
The signs continue to point to expansion. The fifth plant of the Chinese electric car manufacturer will be officially opened on April 15 in the industrial park of Fuzhou. The new factory for vehicles with alternative drives has swallowed up a total investment of almost EUR 2.2 billion. It covers an area of around 2 million square meters, with an annual production of 200,000 vehicles planned. In addition, BYD announced back in December that it would invest EUR 1.2 billion in the construction of a battery project for new energy vehicles in the high-tech zone of Fuzhou. Annual production in 2021 is already impressive, with a 218% increase to over 604,000 e-vehicles.
The minutes of BYD's latest investor meeting recently revealed that the Company's cumulative order backlog has reached 400,000 vehicles and is increasing sharply every month. The new industrial park in Fuzhou will go some way to alleviating the Company's difficulty in meeting demand. BYD shares immediately made up for the Ukraine shock with a 30% rise but now technically need to rise above EUR 30 to generate medium-term buy signals. Meanwhile, Australian bank Macquarie lowered its price target by 16% to EUR 32.40.
The increase in the price of fossil raw materials acts as a catalyst for e-mobility. As a result, the lithium market continues to be under intense pressure. BYD and Standard Lithium are well-known big caps in the sector. Edison Lithium is moving forward with its exploration program and is cheap.
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