Electrical Vehicle Battery Materials; AVZ Minerals Under Investors’ Lens

Electrical Vehicle Battery Materials; AVZ Minerals under Investors’ Lens

The electric vehicle demand is estimated to pick up the pace by the year 2020, and the current EV trend is also positive. As per the data, the global electric vehicle sales exceeded 2 million vehicles in the year 2018, and China alone recorded a sales of 1.26 million new electric/energy vehicles (NEVs) in 2018, which in turn, marks a year-on-year growth of 61.5 per cent, as compared to 2017.

Apart from a spectacular sales in China, the rest of the world registered a sales of 763k vehicle in 2018, which in turn, marks a year-on-year growth of 69.6 per cent in volume.

Mammoth players such as Tesla and Nissan are still enjoying the large share of the market, and the market expects further growth of these behemoths in China from 2019 onwards.

With such high demand and further demand boom projections, the global leading battery manufacturers are also scaling for growth, and the universal battery capacity is projected to reach 1,748.5Gwh by 2028.

Source: Galaxy Resources AGM Presentation

In line with such a high volume and growth in NEV volume, the battery consumption and output in China also inched up on a yearly basis. As per the data, the installed capacity, calculated by total battery capacity installed in a vehicle sold, growing at 30 per cent compounded annual growth rate (CAGR).

The electric vehicle manufacturers are gearing up for an electricity storage battery, which takes different composition.

Battery Composition:

A typical energy storage battery design is straightforward and includes an anode, an electrolyte to carry the charge, and a cathode.

The anode makes up the simplest component of the battery and is generally made up of natural or synthetic graphite. The cathode is the trickiest part of a battery, and it is usually composed of different base metals and chemistry types.

While the battery chemistries are comprehensive, with different safety issues, we would keep our explanation restricted to lithium-ion batteries amid its wide application in the electric vehicle industry due to its high intensity and fewer safety concerns.

Lithium-Ion Battery:

The lithium-ion batteries have the highest energy density and are generally regarded as safe, the lithium-based batteries do not require periodic cycling to prolong the battery life and are of wide application including the electric vehicles. However, the few disadvantages of Li-ion batteries are that they need protection circuit, which prevents the thermal runaway, and a degradation issue when exposed to high temperatures along with an impossible rapid charge at extreme low temperatures.

Lithium battery physical and chemical composition (Source: Korea Battery Association)

Types of Lithium-Ion Batteries:

Lithium Cobalt Oxide:

The battery is composed of cobalt oxide cathode and a graphite carbon anode along with lithium salts as electrolytes.

Lithium Manganese Oxide: 

 The cathode combination of nickel– manganese–cobalt is used along with graphite anode.

Lithium Nickel Manganese Cobalt:

The cathode combination of nickel– manganese–cobalt along with graphite anode, and this is among the most significant Li-ion battery types.

Lithium Iron Phosphate:

The phosphate acts as a cathode material for rechargeable lithium batteries. The combination of phosphate with lithium offers low resistance with good electrochemical performance.

Apart from the chemistry mentioned above there are other popular lithium-based chemistry such as lithium carbonate and lithium hydroxide.

Post addressing the material required for a Lithium-ion batteries, let us now look over the miners, who are actively engaged in the mining of these raw material and resources.

Lithium miner on ASX:

AVZ Minerals Limited (ASX: AVZ)

Latest Update:

As per the announcement made public by the company on 12th June, AVZ entered into a strategic relationship with Zhejiang Huayou Cobalt Co. Ltd, to bank on the Zhejiang Huayou Cobalt Group’s experience In the Democratic Republic of Congo (DRC) and mainland China, which in turn, would further assist the company in completing its Definitive Feasibility Study of the Manono Lithium and Tin Project in DRC.

AVZ mentioned that Huayou would also be able to provide AVZ with financing advice and assistance, along with strategic services. AVZ holds significant amount of resources in the DRC.

AVZ would be benefitted from the experience of Huayou, also Huayou holds 9.47 per cent interest in the company, and the Strategic Relationship is just not limited to the DFS or project financing.

Fundamental Aspects:

Revenue and Income Growth

The revenue of the company noticed a sudden surge in its previous financial year 2018; however, the investors should investigate the reason of the sudden rise to further gauge the dynamics. The sudden rise improved the three-year CAGR as well and it stood at 56 per cent.

Key Ratios:

Source: Thomson Reuters {FY-0 (2018) FY-1 (2017)

On the key ratios front, the return on assets declined from -8.89 per cent to -10.92 per cent in FY2018; while return on equity declined from -14.93 per cent to -15.48 per cent. Both the return ratios (Assets and Equity) for the last twelve months are at -9.73 and -12.73 per cent.

Stock Returns:

                                                                                                                                              

Source: Thomson Reuters

The monthly closing price return over the last six months revolved in the negative territory expect once (from April to May). The return from May’s closing to current closing price stands at -32 per cent.

 

Technical Aspects:

AVZ on Charts:

On a daily chart, the share price of the company has corrected almost 100 per cent of its original rally point, which started in May 2017 or from the level of approx. A$0.028. The rally ended in the early 2018 at the level of approx. A$0.371. Post hitting the top of A$0.371 the prices fell sharply and moved in a downtrend to the present level of A$0.056.

AVZ Daily Chart (Source: Thomson Reuters)

However, in its downtrend the share price of the company recovered slightly in May 2019, post breaking its resistance of A$0.051. The prices broke above the hurdle and rose to the level of approx. A$0.096; however, the share price again retraced back to the present level.

AVZ Daily Chart (Source: Thomson Reuters)

After a breakout above A$0.051, the prices retracted slightly and surged till A$0.096 and fell back, which establishes perfect coordinates to connect the Fibonacci Series. The connecting point of the series is marked as 0,1,2 on the chart shown above.

The Fibonacci outcomes are; 23.6 per cent is at A$0.064, 38.2 per cent is at A$0.072, 50.0 per cent is at A$0.078, 61.8 per cent is at A$0.084, and 100.0 per cent is at A$0.104 respectively.

On following the daily chart further, it can be noticed that the stock is trading below its 200-days exponential moving average. However, the prices are currently between the 50-days and 100-days exponential moving average, which are at A$0.054 and A$0.056 respectively.

The resistance of A$0.501, which previously acted as resistance, is now turning into support for the company’s share price. Investors should keep a close eye around the level of A$0.501, as break-below or sustaining above the level of A$0.501 would decide further action in it.

AVZ Vs S&P/ASX Small Ordinaries:

AVZ Vs AXSO (S&P/ASX Small Ordinaries) (Source: Thomson Reuters)

On comparing the price trend of the share price of the company with the S&P/ ASX Small Ordinaries Index, it can be seen that the share price of the company tracks the movement of the index; however, in the recent development we can observe that the price actions of the company’s share and the index is diverting from each other.

The diversion in the charts are marked with an elliptical shape (orange colour), the consistent diversion in the chart since late December 2018 demonstrates that the company’s share relatively underperformed the index.

Comparative Returns:

Source: (Thomson Reuters)

On comparing the percentage change (as per the monthly closing) since December 2018, we can notice that the benchmark index outperformed the company’s shares over the last 6 months.

To further explorer other lithium players on ASX (Click Here!!) and to know more about technical aspects. Click Here!!

On 20 June 2019, AVZ closed the day’s trade at A$0.057 inching up by 5.556% as compared to its previous closing price. The market cap of the company is A$125.51 million. The 52-week high and 52-week low stands at A$0.155 and A$0.037, respectively. The stock has delivered a return of -43.16% and -27.03% in the past 1 year and YTD basis respectively.


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