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Share Watch – 7 August 2022

Updated: Sep 25, 2022

Share Watch –  Pilbara Minerals (ASX:PLS)

From Stockhead:

The Australian Bureau of Statistics (ABS) says lithium is forecast to contribute $9.4 billion in revenue to the Australian economy in 2023-24. Not really surprising since Australia is the world’s biggest exporter of lithium.

“Australian exports of lithium are primarily in the form of spodumene concentrate however as global demand grows, several Australian lithium mines are commencing production of lithium hydroxide,” the ABS said.

For most of 2021, monthly lithium exports didn’t exceed $250m, but exports values more than doubled from November to December 2021.

From April 2022 to May 2022, exports of lithium almost doubled again, and in June 2022 surpassed a massive $1 billion for the first time.

In June 2022, exports of lithium concentrates reached a record high of $1,163m, up $1,073m (1189%) from June month 2021.

And for the June quarter 2022, total lithium exports were $2,632m, up $2,318m (737%) from the June quarter 2021.

WA accounted for over 99% of Australian lithium exports in each month since January 2021 and China is the one buying it all. In 2021 China accounted for over 85% of total value in each month of 2021 and in 2022, they accounted for over 94% in each month of the year to date.

Breaking that down into monetary value, in June 2022, $1,128m worth of lithium was exported to China. That’s around 97% of the total lithium exports for that month.

Meanwhile, BHP says nickel demand will rise 2-4 times over in the next 30 years on surge in electric vehicle production.

Following on from IEA figures last week, which show the world could need a ludicrous 60 new nickel mines by 2030 to achieve announced carbon reduction pledges, BHP’s Nickel West boss Jessica Farrell told delegates at the Diggers and Dealers Mining Forum in Kalgoorlie demand for nickel to 2050 would increase 200-300% on the previous three decades.

Mind-boggling. No wonder BHP has decided to reinvigorate the division which almost closed down a few years ago when stainless steel demand fell off a cliff and tanked prices.

At ~US$22,500/t, nickel is currently fetching a pretty penny, with BHP selling upwards of 85% of its product into the battery market, including MOUs with current and future EV makers Tesla, Toyota and Ford.

“In just eight years, 3 in 5 car sales will be electric. Electrification of autos is gathering pace and we expect that by 2030, around 60% of all car sales will be electric,” Farrell said.

“Further… we expect that by 2040, 90% of car sales will be electric. The dominant battery chemistry powering this global fleet is expected to rely on nickel.

“Locally, Canberra is the first jurisdiction in Australia to mandate that all new cars must be electric, by 2035.

“This megatrend, combined with a firm demand base from the traditional stainless and class 1 applications, means we anticipate demand for nickel in the next 30 years will be 200 to 300 per cent of demand, in the previous 30 years.”

BHP, which produces around 85,000t of nickel metal a year in WA, is cautious to provide an estimate on where it thinks nickel prices will go as demand for the commodity ramps up.

After delivering first production last year after a delayed construction and ramp up, BHP’s nickel sulphate plant is expected to hit its 100,000t rate (22,000t of nickel metal) by the end of the year, although it has gone mum on a previously discussed plan to double its capacity.

Lithium miners, Pilbara Minerals remain extremely confident about the state of the battery metal’s market, with record high prices making an expansion of its Pilgangoora plant “money for jam”.

Dale Henderson used those words to describe the company’s decision to add another 100,000t of capacity at its Pilgangoora project which will take its spodumene production potential to as much as 680,000t in a $291m project.

A further enhancement to 1Mtpa is being studied. The company increased production by 56% quarter on quarter in the three months to June 30 to 127,236dmt, with shipments lifting 127% to 132,424t. Its annual production rose 34% to 377,902dmt, near the upper end of PLS’ guidance of 340-380,000t.

A further 200,000t of capacity has been commissioned with the start-up of the Ngangaju plant at Pilgangoora, but a hot market means there is plenty of potential for buyers to snap up more raw materials from Pilbara Minerals and elsewhere.

Average realised selling prices rose 61% to US$4,267/dmt, with a record sale of US$7017/t on a 6% Li2O equivalent basis in one of the company’s patented Battery Materials Exchange auctions.

“It’s great to have that capital project approved,” Henderson said. “The board has made it clear to us to drop the clutch and get on with the expansion.

Henderson said current pricing (Platts assesses SC6 spodumene at US$6100/t while Fast markets says spot lithium concentrate is selling for US$6625/t) reflects the “gulf which exists between the existing conversion capacity and the shortage of raw material supply”.

Financial indicators

The VIX fear gauge down by 1.88 points since 24 July to 21.15.

The Dow Jones Industrial Average up 904.18 points or 2.83% since 24 July to 32,803.47, the STOXX 600 up 19.01 points or 2.35% to 435.72 and the Shanghai Composite index down 42.14 points or 1.29% to 3,227.03.

Gold on 1,792.40. US 10-year Treasury Bonds up to 2.834 and oil down to 88.53. Cryptos Bitcoin up by 485 points or 2.14% to 23,167.

ASX 200 up 296.10 points or 4.36% since 24 July to 7,015.60. The Aussie dollar on 69.14 US cents.

Carbon Market Spot Prices

LGC $50.90                                                     STC $39.90

ESC $33.50                                                     VEEC $68.00

ACCU $27.75                                                  EU ETS €84.19

NZU $NZ79.80                                                 UK ETS GBP80.31

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