There is a huge disconnect between the emerging lithium producer’s market cap and its impending cashflow – but how long can it last?
Ken Brinsden is an unflappable sort of guy.
But there was a sense of exasperation from the Pilbara Minerals (ASX:PLS) chief executive earlier in the week on the subject of the apparent disconnect between the market’s treatment of ASX-listed lithium stocks this year and the “absolutely ballistic’’ growth in China’s lithium-ion battery market.
Brinsden is gobsmacked that a basket of ASX lithium stocks (including Pilbara) are down by 12 per cent in the year-to-date against an 18 per cent increase in the China domestic price for battery- grade material.
More than that has been the miserable performance of the ASX lithium stocks compared with the 130 per cent increase for China’s lithium convertors and the 39 per cent gains notched up by the global integrated majors (Albemarle, FMC and SQM).
“The ASX investor base has yet to catch up with what is happening in China, which is just unbelievable. For whatever reason, the ASX has not caught up. But my theory is that it will,’’ Brinsden said.
At the Melbourne leg of an eastern states roadshow put on by Resources Rising Stars, Brinsden offered up some possible reasons for the disconnect. They went to misinformation in this market about the potential for the lithium-ion boom to be challenged by new battery technologies and the assumption that it will be brine producers of lithium as opposed to Australia’s hard-rock sources that will inherit the lion’s share of the phenomenal growth everybody agrees on.
As for the technology challenge, Brinsden said that it took 30 years for lithium-ion batteries to become the rechargeable battery of choice. Now that it is gaining incumbency, the potential for its dislodgement had to be viewed against the 100 years that lead-acid batteries ruled the roost.
On the competition from brines, Brinsden reckons there are some real porkies being told there on costs and quality. There might have been some truth there when it comes to the less demanding qualities of lithium in its historical applications. But when it comes to the 99.5% purity the battery makers want, it’s hard rock lithium that converts in the one pass to meet the quality demands.
Plus, Rumble Resources joins the red-hot zinc sector. Read more +
