Summary
- The share price of Jindalee Resources Limited (ASX:JRL) has surged by over 2.5 times in 2020 so far.
- Jindalee observed an uptick in investors’ interest in the McDermitt project following Tesla’s commitment to localise cathode distribution chain.
- The current landscape in the US lithium market seems favourable for the McDermitt project, where drilling is well underway.
Without a doubt, 2020 has been a roller coaster ride for countries across the globe, especially Australia which was emerging from wildfires when the COVID-19 pandemic struck. Despite these unprecedented challenges, certain Australian businesses have continued to fare well on the back of some favourable market trends.
One such example is ASX-listed resources company Jindalee Resources Limited (JRL), whose share price has increased by over 2.5 times in 2020 to date.
Chairman Justin Manolini recently shed some light on the reasons for this share price appreciation while addressing shareholders at 2020 Annual General Meeting (AGM) held on 27 November 2020. He also underlined the significance of the Company’s US-based McDermitt Project at the AGM.
Factors Driving Share Price Appreciation
Interestingly, Jindalee’s share price has increased from a little under 30c at the last year’s AGM to around 80c at present.
Jindalee has strongly benefitted from two major thematics impacting the global equity markets amidst the COVID-19 crisis, which comprise:
- easy monetary policies in response to the coronavirus pandemic that are generally positive for commodity prices, and
- progressive transition to clean energy & the electrification of transportation that is particularly beneficial for battery metals like nickel, lithium, cobalt and graphite.
Jindalee noticed that investors were re-focusing on the prospects of the battery minerals segment towards the end of FY 2020 to stimulate a post-COVID economic recovery. Investors’ interest piqued in the Company’s US-based McDermitt lithium project after Tesla’s recent commitment to localise cathode distribution chain.
This renewed interest in the McDermitt project seems to be behind the increase in the Company’s share price over the past year. The Company also credits its tight capital structure for its robust share price appreciation.
Significance of McDermitt Project
Jindalee is developing two lithium projects in the US, Oregon-based McDermitt and Nevada-based Clayton North. While the Company is undertaking pre-exploration planning at Clayton North, its priority is resource development at the McDermitt project.
To Read about McDermitt Project’s developments since its acquisition, Click Here!
Late in 2019, Jindalee announced a maiden resource estimate of 155 Mt at 2,000ppm lithium for 1.6 Mt of contained lithium carbonate equivalent at McDermitt, which established the Company as a potentially significant player in the sector. The development of the project’s existing Mineral Resource is expected to make the US self-reliant in lithium.
Importantly, the Company has also continued to scale up its knowledge of the metallurgical attributes of the ore at McDermitt. The metallurgical testwork outcomes so far have been extremely encouraging.
These results have fostered the Company’s belief in the potential of sediment-hosted deposits at McDermitt to make a meaningful contribution to the international lithium supply chain in years to come.
Favourable Developments in Lithium Space
Electric vehicle (EV) manufacturer Tesla’s plan to source and refine its lithium from local deposits recently drew considerable attention to the presence of lithium sediment deposits in the US as a prospective source of raw materials for the EV market in the US.
Tesla’s announcement came at the time when the US is planning for the New Energy Revolution with large operating/expansion and construction of new battery factories. Tesla’s move is expected to encourage other automakers to follow its lead.
Significantly, Jindalee’s US-based projects are strategically positioned with respect to Tesla’s Gigafactory, as demonstrated in the below map:
Jindalee believes that the strategic location of its McDermitt project in the US provides it with a unique value proposition in comparison to its ASX-listed peers. This belief encourages the Company to continue to spend a judicious amount of funds on the project despite the challenges of operating a global project in the COVID-19 era and the still subdued lithium price.
Besides Tesla’s commitment, the recent win of Joe Biden as the US President is also considered very positive for the US lithium market. The new government’s attention is focused on reducing carbon emissions through renewables, with key drivers being EVs and energy storage.
It is imperative to note that the demand for lithium is anticipated to rise substantially to meet emission targets with the uptake of lithium-ion batteries for energy storage and EVs. Besides, one cannot neglect that the US produces just 1.2 per cent of the world’s lithium, and majorly relies on imported lithium. Consequently, the nation is vulnerable to supply chain disruption.
Mr Biden has pledged zero carbon emissions by 2050 and has committed to spending US$2 trillion on EV infrastructure and other carbon reduction projects, which can work in favour of the lithium market. Besides, the US has Bi-partisan support for the development of critical mineral projects, including lithium.
All in all, several bright spots are dazzling in the US lithium market for Jindalee’s McDermitt project, at which the drilling program is well underway. With the completion of over half of the drill program, the Company looks forward to receiving first assays from the project in late-December 2020.
JRL stock traded at $0.820 on 04 December 2020 (AEDT 10:51 AM).
