China, a country which is known for producing and supplying the majority of the lithium products to the world, is currently witnessing a massive shutdown of industries and plants due to Coronavirus outbreak, causing supply chain disruption for electric vehicle companies as they are heavy users of lithium batteries. Before this, the battery material space was already under pressure due to the bilateral dispute between the United States and China.
To Read More on Coronavirus: Effect of Coronavirus and Market Fluctuations
One of the leading chines lithium producers - SQM recently warned the market that its sales volume in the first quarter of 2020 might be around 2k metric tonnes lesser than earlier expectations. Despite this warning, SQM is of the view that the fundamentals behind the demand growth in the lithium industry are stronger and has plans to further expand its lithium carbonate capacity in Chile.
There is a high probability that the decrease in the demand for lithium products in China could spread to other parts of the world. In the light of the above scenario, let us take a look at few ASX listed lithium stocks.
ioneer Limited (ASX:INR)
Emerging lithium-boron supplier, ioneer Ltd recently responded to coronavirus outbreak wherein it informed that there has been no impacts to its business operations or ability to meet key project milestones due to the virus.
The company also informed that its Definitive Feasibility Study (DFS) is on track to be delivered according to plan while state and federal permitting processes are advancing as anticipated. The Company is currently finalising the Plan of Operations for the development of the Project and intends to file it with the U.S. Department of the Interior - Bureau of Land Management soon which will trigger the environmental review process under the National Environmental Policy Act (NEPA).
Exploration and evaluation expenditure for the first half of FY2020 was $25.7 million which reflects the continuation of the increased work program across the period with a particular focus on the DFS for Rhyolite Ridge. In the past one month, INR stock has declined by around 40% on ASX and the stock is currently trading near to its 52 weeks low price.
Galaxy Resources Limited (ASX: GXY)
Global lithium company, Galaxy Resources Limited recently provided an update to its Mt Cattlin Mineral Resource and Ore Reserve estimate wherein it highlighted that in 2019 Mt Cattlin Mineral Resources were depleted by ~2.1Mt from mining operations. A break-down of Mt Cattlin’s Mineral Resources at 31 December 2019, are detailed in below table.
On the financial performance front, for the year ended 31 December 2019, GXY reported revenue from ordinary activities of US$69.5 million and loss of US$283.74 million. The loss was mainly due to lower spodumene price; impairment of Mt Cattlin property plant and equipment and derecognition of deferred tax asset. As at 31 December 2019, the company had cash and financial assets of USD 143.2 million with no debt in the balance sheet.
In terms of production, 2019 was a record year for the company. Over the year, the company produced 191,570 dmt of Spodumene and sold 132,687 dmt of it. From the starting of the year 2020, the company has been observing setbacks in its customer base of China due to the impact of the Covid-19.
In the past one month, GXY stock price has declined by around 34.84% as at 12 March 2020. GXY stock is currently trading near to its 52 weeks low price.
Orocobre Limited (ASX: ORE)
Orocobre Limited is mainly involved in the exploration and production of minerals along with a major focus on the development of potash and lithium resources in Argentina. Despite the softer conditions in the market, the company managed to deliver positive operating margins during 1H FY20. Total production for the period stood at 6,679 tonnes of lithium carbonate, which reflects a rise of 10% on pcp. It received positive results from the Olaroz Lithium Facility with the revenue amounting to US$39.4 million from the sale of 6,395 tonnes of lithium carbonate.
With respect to Olaroz Lithium Facility, the company anticipates production for FY20 to be at least 5% higher as compared to FY19. ORE forecast the average sales price of around US$5,000 per tonne for the March 2020 quarter.
Recently, the company’s Director Martín Pérez de Solay acquired 272,813 performance rights. In the past one month, ORE stock price has declined by around 41.64% on ASX. The stock is currently trading near to its 52 weeks low price of $1.835.
At market close on 13 March 2020, ORE stock was trading at a market price of $2.190, up by 6.311% intraday, with a market cap of around $539.67 million. The stock is currently trading at a Pe multiple of 23.790x.
Pilbara Minerals Limited (ASX: PLS)
Pilbara Minerals Limited is a lithium and tantalum exploration company with a market capitalisation of $355.79 Mn as on 13th March 2020. During 1H FY20, PLS experienced weaker market conditions in China and low customer demand for lithium raw materials.
Financial Summary (Source: Company Reports)
In order to ensure cautious management of its operating cash flows, balance sheet as well as its working capital position, the company would continue to operate under a moderated production strategy during 2H FY20. To further strengthen the balance sheet, the company has wrapped up the equity raising of $111.5 million during 1H FY20. The company ended the half year with the cash balance of $105.5 million along with working capital of $94.8 million.
At market close on 13 March 2020, PLS stock was trading at a price of $0.175, up by 9.375% intraday. Despite the significant intraday increase, the stock is still trading near to its 52 weeks low price.
To Know More, Do Read: Spodumene Pullback- How are the Key Australian Players Positioned?
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