mark2017's Commodities to Watch

REUTERS
Aug 7th 2017 at 4:30PM

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LONDON - Producers of processed lithium — an essential element for batteries used in electric cars — are agreeing to long-term contracts with their customers to fund the investments needed to address a looming shortfall.
Demand for battery-grade lithium compounds is expected to skyrocket in the next decades in tandem with soaring demand for electric cars as governments, individual consumers and automakers from BMW to Volvo try to reduce their carbon footprint. Lithium also has a role to play in power-grid storage systems from companies like Tesla, and could be used in future technology such as the solid-state batteries being pursued by Toyota and others.
The production and use of electric cars is projected by Morgan Stanley analysts to rise to 2.9 percent of 99 million new vehicles in 2020 and to 9.4 percent of 102 million new vehicles in 2025, from 1.1 percent of 86.5 million this year.
By 2050, 81 percent of 132 million new auto sales will be electric, Morgan Stanley says.


Although there's plenty of lithium around, the problem is ensuring there is enough capacity to process it.
Battery makers and other end-users such as car manufacturers will need to sign multi-year deals that encourage large producers to invest more, and faster, industry sources say.
Some of that is already happening.
"We've established the timeline for our own expansion based on the commitments our customers are making with us," said Tom Schneberger, global business director at U.S.-listed FMC Lithium, one of the world's top four producers.
"Our first priority will be to provide the adequate supply of the high quality products upon which (our strategic customers) rely," he told Reuters.
Expansion plans by Chile's Sociedad Quimica Y Minera (SQM), another of the top four, for next year are also based on long-term agreements, the company said.


WHAT IT IS, WHERE IT COMES FROM
The lithium-ion batteries needed to power electric cars use lithium carbonate or lithium hydroxide, but the industry typically talks in terms of lithium carbonate equivalent, which contains both.
Two types of lithium deposits dominate.
One is hard rock as found in Australia, for which ready-to-go capacity to produce battery-grade lithium can take up to three years. The other is brine, mostly found in Chile and Argentina, which can take seven years or more.
China has reserves of both.
Consultants Roskill estimate 785,000 tons of lithium carbonate equivalent a year will be needed by 2025, amounting to a 26,000-ton shortfall from anticipated supply, compared to 217,000 tons of demand versus 227,000 tons of supply this year.
Others expect an even larger deficit.
"There's limited visibility into where we're going to get the last 200,000 tons of lithium if we hit the numbers Roskill is expecting for 2025," said Seth Ginns, a managing director at Jennison Associates.
Jennison manages more than $164 billion of investment and is a top 10 investor in both FMC and U.S.-listed Albemarle, another of the top four producers.
"We estimate the lithium industry is going to need between $4 billion-$5 billion of investment out to 2025," said Simon Moores, managing director at Benchmark Minerals Intelligence.
Price projections out to 2025 are not available, but Benchmark estimates prices of lithium carbonate will average $13,000 a ton over the 2017-2020 period from around $9,000 a ton in 2015-2016.
Demand for lithium hydroxide, preferred over carbonate as it allows greater battery capacity and longer life, is expected to grow at a faster pace. Benchmark predicts the price to average $18,000 a ton between 2017-2020 against $14,000 in 2015-2016.

FOUR COMPANIES DOMINATE
Top producers are looking at a bonanza if they can ramp up investment fast enough with end-user commitments in hand.
"There are four names that dominate and that is likely to be the case for the next five years," said Jeremy Kent, a portfolio manager at Allianz Global Investors.
Roskill managing director Robert Baylis estimates FMC, Albemarle, SQM and China's Tianqi Lithium Corp. together accounted for 66 percent of the world's lithium carbonate equivalent last year. Wood Mackenzie consultant James Whiteside puts the figure at 78 percent.
FMC's lithium hydroxide capacity rose 80 percent in 2017 to 18,000 tons a year, and it has plans to boost that to 30,000 tonnes by the end of 2019. After that, capacity will be expanded as required by demand, FMC's Schneberger said.
Albemarle is planning to expand its lithium carbonate equivalent capacity to 165,000 tons by 2021 from 89,000 tons this year, a spokesperson said. "We anticipate spending $700 million and $1 billion over the next 5 years."


SQM said in an email it was planning to invest $50 million to expand its lithium carbonate capacity in Chile to 63,000 tons by 2018 from 48,000 tons currently. It also has joint ventures in Argentina and Australia to develop deposits.
Tianqi Lithium declined to comment on its investment plans.
Another company actively investing is Australia's Orocobre, which planned to produce 17,500 tons a year of lithium carbonate at its Olaroz facility in Argentina.
Severe weather cut this year's production to 11,700-11,800 tons, however.
Whiteside said Orocobre's difficulties were typical of many smaller players, noting that the Olaroz facility was the first new major brine operation started in 20 years.
"Because the number of brine operations has been so few historically, there are very few technically experienced chemical engineers to assist these junior companies," he said.
"There are people out there promoting brine projects with plans that are not as robust as they should be."
Reporting by Pratima Desai and Zandi Shabalala; additional reporting by Rosalba O'Brien and Tom Daly.

•Image Credit: Workers in a boat at lithium brine pools in Chile. Reuters
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All You Need To Know About Northern Star Resources Limited’s (ASX:NST) Financial Health
Veer Mallick August 16, 2017
Stocks with market capitalization between $2B and $10B, such as Northern Star Resources Limited (ASX:NST) with a size of $2.94B, do not attract as much attention from the investing community as do the small-caps and large-caps. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. Mid-caps are found to be more volatile than the large-caps but safer than small-caps, largely due to their weaker balance sheet. I will take you through a few basic checks to assess the financial health of companies with no debt.
Check out our latest analysis for Northern Star Resources


Is NST’s level of debt at an acceptable level?

ASX:NST Historical Debt Aug 16th 17


A substantially higher debt poses a significant threat to a company’s profitability during a downturn. For NST, the debt-to-equity ratio is 1.75%, which indicates that the company faces low risk associated with debt.

Can NST meet its short-term obligations with the cash in hand?

ASX:NST Net Worth Aug 16th 17


Debt to equity ratio is an important aspect of financial strength. But if the company has a substantial amount of cash on its balance sheet, that should allay some fear of a debt overhang and increase the chance of meeting upcoming liabilities. In order to measure liquidity, we must compare NST’s current assets with its upcoming liabilities. Our analysis shows that NST is able to meet its upcoming commitments with its cash and other short-term assets, which lessens our concerns for the company’s business operations should any unfavourable circumstances arise.

Conclusion
NST’s ability to meet its short-term liabilities is an indication of financial strength. Its debt level is also relatively low, which reduces some risk for the company and its investors. Now that you know to keep debt in mind when putting together your investment thesis, I recommend you check out our latest free analysis report on Northern Star Resources to see what other factors for NST you should consider.
 
Neometals updates from Mount Marion following Mineral Resources results
Neometals Ltd updates from Mount Marion following Mineral Resources Ltd results


Neometals approaches buy-back milestone of 20 million shares
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At June 30, Neometals held A$62 million in cash and investments, with no debt.
Neometals Ltd approaches buy-back milestone of 20 million shares
 
Aug 25 2017 at 12:15 AM
Updated Aug 25 2017 at 12:15 AM
Save article Print License article Galaxy brings Goldman into its defence orbit
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Share via Email Share on Google Plus Post on facebook wall Share on twitter Post to Linkedin Share on Reddit Galaxy Resources has brought Goldman Sachs into its tent as a defence adviser.
Richard Drew
by
Sarah Thompson Anthony Macdonald Joyce Moullakis The price divergence between global and local lithium stocks has spurred some Australian listed companies into action.

Street Talk understands one of those is Galaxy Resources which has brought Goldman Sachs into its tent as a defence adviser.

This column is not suggesting Galaxy has received an approach or is about to. But against the current backdrop, it makes sense for Galaxy to shore up its advisory team.

Certainly, shares in Australian lithium players haven't experienced the same boost as their global rivals in 2017, which in theory could make this market a happy hunting ground.

Kidman Resources' market capitalisation is hovering at circa $213 million, making it easy prey for a large global predator. Galaxy's shares rallied as high as $2.46 in May this year and on Thursday were changing hands at $1.755, giving the company a market cap just shy of $700 million.

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View all announcements In March, Galaxy was among several Australian lithium aspirants named in a presentation released by US lithium giant Albemarle that ranked the asset quality of the world's lithium mines.

Albemarle and other majors, which have traditionally produced lithium from brines, have been prowling Western Australia for hard rock lithium assets they can take a stake in, or take out completely.

While brine-based lithium is cheaper to produce, sources have said Asian battery manufacturers have stated a preference for the higher quality lithium derived from hard rock assets, driving brine-based companies and upstream players to look at deals they would not have previously considered.

Chile's SQM acquired half of Kidman Resources' Earl Grey lithium project for $US110 million in July, and a number of Chinese lithium and chemicals companies have stakes in West Australian projects. Local miners have also talked of battery and car manufacturers being keen to secure supply.

Galaxy has the hard rock Mt Cattlin mine in WA but its wider geographic footprint and production diversification may broaden its appeal. It also has the James Bay hard rock development project in Canada and the Sal de Vida brine development project in Argentina.

Galaxy's chairman Martin Rowley knows the Goldman resources team well. The investment bank is also the defence adviser for First Quantum, which Rowley co-founded and was a director of until earlier this year.


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Read more: http://www.afr.com/street-talk/gala...s-defence-orbit-20170823-gy2wvt#ixzz4qhYNjLIB
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4% UP!


We’re Going to Need More Lithium

There’s plenty in the ground to meet the needs of an electric car future, but not enough mines.
By Jessica ShanklemanJessica Shankleman, Tom BiesheuvelTom Biesheuvel, Joe RyanJoe Ryan, and Dave MerrillDave Merrill
September 7, 2017
Starting about two years ago, fears of a lithium shortage almost tripled prices for the metal, to more than $20,000 a ton, in just 10 months. The cause was a spike in the market for electric vehicles, which were suddenly competing with laptops and smartphones for lithium ion batteries. Demand for the metal won’t slacken anytime soon—on the contrary, electric car production is expected to increase more than thirtyfold by 2030, according to Bloomberg New Energy Finance.
https://www.bloomberg.com/graphics/2017-lithium-battery-future/
 
Go up!!!


Why Invest in Northern Star
Highly profitable: Record half year net profit after tax of A$104.6M (US$77M), up 61%;
EBITDA margin of 53%; track record of dividends, paid A10¢ps in 2016 (up 100% from 2015)
Strong balance sheet: no debt; A$393M (US$289M) in cash & equivalents (31 March 2017)
Emphasis on financial returns: Past 5 years avg TSR* +60%, ROE of 30% and ROIC 27%
One of the few ASX-listed gold miners with critical mass and asset diversity: FY2017
production of 485koz-515koz at an AISC of A$1,000-1,050/oz (US$735-US$771/oz)
Record of strong growth – with much more to come: Focused on our Tier 1 operations to
drive increased production and a simplified business model, increasingly more valuable
Aggressive exploration strategy delivering outstanding results; Reserves grew 33% in
FY2016 (after depletion) at average cost of just US$37/oz; US$44M spend this year has the
potential to significantly increase Reserves and underpin a clear road map for the future
Committed US$51M to expansion capital this year; this will underpin growth in production
and cashflow from 2018 onwards
Strong management team, track record of delivering operational and corporate objectives
which in turn have consistently achieved sector leading returns to NST Shareholders
15 Source:* Boston Consulting Group paper on “Delivering value in t

Northern Star
 
China’s Electric Car Switch to Rattle Industry, Drive Up Price of Lithium
Article ID: 680874

Released: 11-Sep-2017 12:05 PM EDT

Source Newsroom: Cornell University
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Environmental Science, Green Tech, Technology, Travel and Transportation, Local - New YorkKEYWORDS
China, Clean Energy, Car industry, Lithium Batteries, Electric Cars,
electric car batteries, Environment, Emissions, Pollution, Air Pollution,
Beijing, Chinese Government, Automotive industry
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China’s electric car switch to rattle industry, drive up price of lithium

Newswise — Chinese regulators recently announced that the government is setting up a timetable to end production and sales of petrol and diesel cars. China is following the example of other countries, such as Britain and France, that announced similar moves towards cleaner vehicles in the coming years. Arthur Wheaton, an automotive expert with Cornell University’s School of Industrial and Labor Relations, says that while the ban makes sense in a country plagued by pollution, obstacles remain.

Bio: https://www.ilr.cornell.edu/people/arthur-wheaton



Wheaton says:

“The move to alternative fuels makes sense in China, but there are many issues associated with legislating a single solution to the pollution problem. Lithium-ion batteries are the most common electric batteries for automobiles. Lithium is also in relatively short supply and is highly unstable when not manufactured correctly.

“If China does impose a full ban on internal combustion engines it will rattle the industry and make the price for lithium jump as it is already in short supply. There have been promises of hydrogen-powered fuel cells for generations but no major breakthroughs yet.

“California has tried many times to impose regulations on zero emissions vehicles and had to cancel or delay them as problems inevitably screw up the plans. Currently, the U.S. market is much less likely under the current administration to even consider this as an option. It is not fighting the same battle and has moved away from regulations to improve the environment.”



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