The Battery Metals Special: Investor Webinar 19 July 2023

 

In this week’s Investor Webinar we talk about Battery Metals:

– Manganese
– Lithium

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Full transcription below.

 

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Transcription

 

Marc: Good morning. It’s Wednesday, the, 19th of July, 2023. And we’ve all heard of Christmas in July, but I understand, Stuart, that hat you’re wearing has got nothing to do with that.

Stuart: So, Nick Sandage and I from our firm are headed down to Tasmania this weekend, for the annual Bioshares meeting. Used to happen in Queenstown in New Zealand, happened last year in Aubrey on the New South Wales Victoria boarder, and now it’s in Tasmania. The reason for the red hat is the opening night dinner, which we call the Peasants Dinner. I’m the host of the Peasants Dinner, and we’re doing the Red Hat Awards representing some of the excellent people in biotech who are creating some serious shareholder value. And, we call them the Red Hat Awards in honor of… Well, traditionally the red hats was worn by peasants, so I’ve got a few Santa hats to hand out on the night.

Marc: All right. Well, I’m glad we know that. Yeah, I was gonna say, you might wanna take it off to add some a bit more credibility to this webinar, Stuart. Before we jump into the things we wanna talk about, and I think it’s fair to say that it’s mostly battery minerals today. Before we jump into that, I just want to flag that today is one of our overseas Concierge stock picks is reporting, it’s listed on NASDAQ. It’s been on our Concierge top picks list since May. It’s up 9% since then. Pretty happy with that, but today it’s reporting. So if you’re a member of Stocks Down Under Concierge, you’ll get a notification later today with those results, and hopefully we see a positive share price return or performance on the back of that. So we’ll know later today. Stuart, let’s jump in with… So we’ve got two presentations for everyone today, lithium and manganese, but let’s start with manganese. What is that all about? Where is it? What is it used for and what are the prospects here?

Stuart: I’m glad you asked, Marc. So let’s talk about manganese, element number 25 on the Periodic Table. The forgotten battery metal is what I like to say. When you think batteries, you think lithium and you think potentially nickel, not a lot of people are talking about manganese, but in fact that’s a big use going forward, for this poorly understood metal. Most manganese goes into industrial alloys, particularly in stainless steel. So traditionally BHP used to mine the stuff at [inaudible 00:02:34] Island up in the Northern Territory, and they’d ship it down to be refined at Bell Bay in Tasmania. That business went over to South 32. You put manganese into steel, it gets stronger, it’s more workable, it’s wear resistant. So, there’s no sign anytime soon that manganese will cease to be an important industrial metal.

In addition to which, you put it in as an oxidizing agent, if you’re making manganese oxide, those sort of chemicals, put it into rubber, glass, fertilizer, ceramics, fungicide, there are endless other uses, but the big one that’s coming is in batteries. So let’s talk about that for a second. You find that it’s used in the conventional nickel-based chemistries for batteries, but also the emerging lithium iron phosphate batteries. What do you get with it? Well, it’s a relatively inexpensive metal compared to others. So, you get a lower cost battery with the same amount of energy density in range if you use manganese in it. And that’s why Volkswagen, Tesla, Stellantis, they intend to make more manganese rich batteries. CATL the big Chinese battery maker, that’s in on the same game. So you’re beginning to see the emergence of manganese. It’s an important battery mineral.

Marc: What’s the addition to the range, Stuart, roughly in percentages, if you add manganese?

Stuart: Well, you get the same amount of range, but you’re pulling out other expensive metals such as cobalt, for example, if you use that. That’s where it’s coming to. So the aim of the game is to get the price of the battery down and then do other things to maintain the energy density. It’s fair to say that car batteries are getting a fair bit of range at the moment. Range anxiety is gradually going away, and this will be another reason why that will happen.

Marc: Right. Look, I’m a petrol head, right? So, when I fill up my car, it says 1,100 kilometers to go, and I like that. I like that number, right? And although most of my driving is, you know, in the city, I still like that high number. If you want to go somewhere, you know, long drives, you don’t have to fill up, or you don’t have to recharge. Even the most modern EVs, like the Audi e-tron, for instance, they only have a range of, like, 400 kilometers, right?

Stuart: Yeah.

Marc: And if you accelerate too fast a couple of times in a row, that goes down really quick. So, range anxiety in my view, but look, I’m a petrol head, is going to be with us for a little while until you get about 600, 700, 800 Ks on a charge, is my thinking.

Stuart: Right. So I think over time, that range will creep up. In the meantime, you’re gonna see more charging stations that work quickly, and that’ll bridge the gap over the difference that you’re talking about over time. And that’s coming. Let’s return to manganese. Interestingly, the price of manganese took a big dip in 2020. It tends to be a bit boom and bust, but it’s been pretty stable between about $28 and $36 a ton, for the last three years. So it’s fair to say that manganese is turning out to be a fairly dependable metal, if you can produce it at a reasonable price. And like iron ore in many cases, it’s just scraped off the surface. So it’s a low cost metal to produce, then you’ve got a pretty reliable commodity.

I’ll give you an example of that. That’s the chart for Jupiter Mines. Jupiter owns half of the Tshipi Borwa Manganese Mine in northwest part of South Africa. Got that mine up and running several years ago. And it’s been a pretty dependable producer of manganese in the meantime, most product going off to China. And as you can see there, I think the stock is stabilizing at the moment. You’re starting to see a few projects emerge in Australia, one of them is Element 25 with Butcherbird, and the other one is Firebird Metals with their Oakover Project, also near Newman. So, up where you find iron ore in many cases, you’re often finding manganese as well, and that’s what’s happening in Australia. So the potential for Australia to turn to a serious manganese producer is increasing over the years.

Marc: Firebird, not to be confused with Firefinch, right?

Stuart: Different company. And we’ll talk about that in a moment. If you flip to the next slide. That’s Peter Allen, who’s the CEO of Firebird Metals. So when his baby smiles at me, he goes to Oakover, that place up near Newman. Now, the reason you should pay attention to this one, first of all, it’s backed by the legendary Tolga Kumova. Tolga is one of the better known resources investors with a great track record of success and he owns 8% of this stock. Firebird is done a scoping study on just producing concentrates at Oakover, and it’s got a project value of about in excess of $300 million, using an 8% discount rate.

Very shortly, they’ll bring out the results of another scoping study where you’re actually producing high-purity sulfate manganese. And I wouldn’t be surprised if the project value takes a significant jump up at that point, then you move to prefeasibility study, and the bankers will be very interested because everyone’s on the lookout for dependable sources of manganese, in a two one jurisdiction like ours. And I had the privilege of meeting Peter in February over in Perth. He’s worked for some of the big companies that are involved in manganese. So he’s probably the most knowledgeable person you’d find in Australia on that particular commodity, and he’s chosen to work on this project.

Marc: And he seems really happy in that picture. So, looks like things are going well. All right. Well, let’s jump straight into lithium then, while we’re on the subject of battery metals.

Stuart: Yes. Laissez les bons temps rouler, let the good times roll. You’ve seen some lithium stocks have really good performances just lately. And, no surprise, that is lithium by the way, there Marc, that pile of white powder.

Marc: Oh, right, okay. I thought it was something else, Stuart. Also from South America?

Stuart: That is from South America. So, you could be confused, you could be… It’s okay to be confused about that.

Marc: I was gonna have my straw ready, anyway.

Stuart: So, price of lithium stabilized just recently. Now, lithium’s not the most transparent of commodities. That’s the landed price of the commodity in China, at spot. And most lithium doesn’t change hands at spot, in fact, very, very little does. But as you can see the first few months of the year were terrible for lithium because there was temporarily a surplus of the commodity in China, thanks to a winding back on subsidies to electric vehicles in that country. Well, that all came to an end about May, and it turned around in a serious way, stabilized since then. So this is not the easiest way of looking at the commodity, but as a first pass glance, it tells you that the bear market we’ve had a while ago is over, and we’re not going back to another bear territory at the moment.

Marc: Can I blow our own horn for just a second, Stuart?

Stuart: Oh, yes, please.

Marc: Because we had a very successful Concierge pick in the lithium space, right as that price bottomed out. So Leo Lithium, we picked that one at 56 cents, and it went up so fast, Stuart, in that rebound in the share price, or sorry, in the lithium price, we got out at 56% profit, just a month later, right? So it was just writing that price correction, if I can call it that, all the way until stabilized. So that’s the sort of, you know, trades you get if you sign up for Stocks Down Under Concierge, right? Sorry to interrupt Stuart, but I think that’s important for people to know as well, right?

Stuart: Right. And remember, we got one of the most undervalued of the lithium plays at the time. This is a company with a mine that is going live pretty soon. It’s funded and it’s trading all at the moment. They’ve had some communication with the government of Mali, concerning the arrangements for their direct shipping ore. We’ll find out what that is shortly. But, yeah, it’s, the stock was trading way below net present value of a project that was almost certain to go ahead. Anyway, we digress. Let’s talk about… Well, okay, that is the price of Leo Lithium there. So that’s just what Marc’s talking about. We managed to catch the beginning of that upswing, and it’s continued after we closed out that transaction. So those folks who stayed in that call have continued to do very, very well. But I wanted to turn our attention to a different content, Argentina.

Argentina is the world’s fourth largest lithium supplier after our own country, Chile and China. It’s part of the so-called lithium triangle of Bolivia, Chile and Argentina, where you can find the lithium in brines, trapped in the under salt lakes, high in the Andes, where everything’s pretty arid. So that industry has been developing for a long time, and Argentina has been very attractive to potential lithium developers because of the potential to find low cost lithium. Now, the lithium boom has gone on regardless of the government of Argentina, because a lot of mining regulation takes place at the provincial level. And what that means is the provinces that cover Argentina’s Northwest are very pro-mining and very pro-lithium. Turns out the government in Buenos Aires is also quite pro-lithium. It’s just that the country has been a basket case, under the leftist who’ve been running it since 2019.

Well, that’s about to change. Argentina has elections again this year. The incumbent, president Fernandez will not be standing because he’s so unpopular. We’ll have primaries for the major coalitions, that will square off against each other on October. And those primaries are happening next month. I’m willing to predict that Argentina will become a lot more investment grade going forward, because it’s likely to swing to a more market friendly president, as of this election. So, Argentina’s investment destination is about to take a kick up. So anyone kicking around in potential Argentina Lithium plays could be in for a half decent rerating, as early as next month.

Various stocks to look at, I’ll draw your attention, for instance, to Pursuit Minerals, they’ve just laid their hands on a decent lithium play up there in the triangle. Power Minerals, they’ve not only got the project, but they’ve also brought in a very interesting partner and some in-ground project management. And there are other plays. And as you can see, it stretches over all three. But, the really big money is on the Argentine side of the Argentina-Chile border, that’s where the really rich ones are. So Argentina got really lucky here. And most players have been positioning themselves in the Argentine side of the triangle.

Let’s talk about Galan Minerals. That handsome man on the right-hand side of the screen is JP Vargas de la Vega, known to everyone as JP. JP was many years a resources analyst in Perth, originally from Chile, but immigrated to Australia. And he could see years in advance of the rest of us, that Argentina was gonna be a great lithium destination. I had first had the privilege of meeting JP back in 2019 when Marc and I attended our first resources conference together in Sydney. And you needed a magnifying glass to see his stock.

But he was pretty confident that with the salars that he’d positioned himself on. Salar being, sort of like, that he had something. Well, fast forward in time, the market cap after a pretty torrid 2023 is still just about $300 million. He’s got a stage one DFS showing that just the beginnings of his Hombre Muerto Salar project in Argentina. He can get an NPP of $460 million on that one, spending just $104 million. That stage one pretty much bootstraps the funding for stage two, three, and four of this project, between now and the end of the decade. And you go from those original 4,000 tons all the way up, potentially, if the market warrants this, all the way up to 60,000 tons a year. So JP has got big plans at the moment. And he’s funded to get a lot of stuff done. He’s got 50 million in cash at the moment.

So, I predict that Galan will be the next serious player, for, Argentine lithium, thanks to JP. You wouldn’t know that from the current share price, and this is why I’m saying people should watch carefully. As you can see, the stock peaked very early in 2022, got brought down in the bearish conditions for lithium that prevailed up until about May or June. It’s continued to slide a little bit, but the man who knows this story the best, old JP himself, has just bought $105,000 worth of stock at just over 90 cents. So I’m watching this one carefully, because I think it’s gonna stabilize at around the current level, and particularly you’ve got that potential relating, all thanks to the Argentine political situation. And in the meantime, next month, he’s likely to come out with the valuation for stage two of HMW. So watch this one carefully.

Marc: All right. Well, Stuart, I have to say, I’m impressed with your Spanish pronunciation.

Stuart: ¡Arriba, arriba! ¡Ándale, ándale !

Marc: Yeah. I do have to say though, on your French, you probably have to work on that a little bit more. So, if you can do me a favor, I’m just bringing up this slide here. If you can pronounce that French bit there.

Stuart: Let me put on the French energy here. Laissez les bon temps rouler. How’s that?

Marc: Yeah. Close enough, I guess. Alrighty. So this was the Battery Metal Special then, if you can call it that. So thanks everyone for watching. As always, send in your questions to [email protected], and we’ll try to answer those in this webinar. Stuart…

Stuart: And if you’re going to buy shares down at Hobart this weekend, I’ll see you in person down there.

Marc: All right, good stuff. And, yeah, well, again, if you haven’t subscribed to Concierge, do that now, because you’ll get the most recent update on our overseas tech pick on NASDAQ later today. And, all of the other ones, obviously, because it’s reporting season now, you’ll begin updates on those as well. And by the way, we’re up 37% with our current active trades, so we’re pretty happy with that. The market is still sort of flat, compared to last year. So, again, outperforming in the second year of Concierge, we’re massively outperforming the broader market. So do yourself a favor, sign up for Concierge and we’ll see you next week.

Stuart: See you next week.