Australian lithium stocks could see a wave of institutional money flow their way, according to a report from E&P Financial.
The report comes after Rio Tinto’s $9.9 billion takeover of Arcadium, which was made possible by a collapse in lithium prices, and sees investors face a shrinking pool of miners to invest in.
E&P analyst Adam Martin said: “Rio’s acquisition of Arcadium feels like bottom of the cycle of M&A.
“We are conscious that one more M&A deal in the lithium sector would ‘light up’ equities given limited options to play this thematic globally.”
Another acquisition in the works in the lithium space is the takeover of Latin Resources Ltd (ASX:LRS, OTC:LRSRF) and its flagship Salinas Lithium Project in Brazil by Pilbara Minerals Ltd (ASX:PLS) in a deal worth around A$560 million and implies a 57% premium to the Latin share price prior to the announcement.
Near term prices likely to remain subdued
After peaking in late 2022, the lithium price has declined significantly, yet the market has stabilised recently.
E&P are not anticipating immediate lithium price rises but are confident in the longer term outlook, saying, “electrification is coming, it’s more the rate of build-up that’s at question, and whether the cost structure of some new incremental lithium supply (i.e. parts of Africa/China) is as low cost as speculated".
Yet one factor that could support Australian lithium companies is China's stimulus efforts creating potential upside, along with the West's eagerness to diversify its battery supply chains away from China.
Upside potential recognised
E&P highlighted the upside potential for a number of ASX-listed lithium companies including Pilbara Minerals Ltd (ASX:PLS), Mineral Resources Ltd (ASX:MIN), IGO Ltd, and Liontown Resources (ASX:LTR) Ltd.
There are also a number of companies at the smaller end of the market who would benefit from increased M&A activity in the space including Anson Resources Ltd (ASX:ASN, OTCQB:ANSNF) and Green Technology Metals Ltd (ASX:GT1, OTC:GTMLF).
Anson Resources
Anson Resources is focused on developing its flagship Paradox Lithium Project in the Paradox Basin in Utah, USA into a significant lithium producing operation.
An oversubscribed share placement completed this week leaves the company well funded and the raise comes as strong endorsement of its growth strategy.
A 2022 definitive feasibility study outlined lithium production of 13,074 tonnes per year of LCE from the project over an initial 10-year life, with potential for a total production life of 23 years should no additional resources be incorporated.
The company is also developing the Green River Lithium Project just 40 miles from Paradox, which is shaping up as a rapid development opportunity, and has additional projects in Australia.
Green Technology Metals
Canadian-focused multi-asset lithium business Green Technology Metals’ Ontario lithium projects comprise high-grade, hard rock spodumene assets (Seymour, Root, Junior and Wisa) and a number of lithium exploration claims on highly prospective Archean Greenstone tenure in north-west Ontario.
The flagship Seymour Project is host to multiple LCT pegmatites and offers outstanding potential to make new proximal lithium discoveries.
A December 2023 preliminary economic assessment (PEA) validated the potential for GT1 to emerge as a large-scale, cost-effective producer of lithium concentrates and chemicals, emphasising environmentally sustainable production of SC5.5 spodumene concentrate and lithium hydroxide.
GT1 chair John Young said: “despite the market challenges we’ve encountered, our team has made significant strides in advancing our operations in Ontario, Canada.
“From the outset, our strategy has been clear: to establish a vertically integrated lithium business in the region and become the first to produce both lithium chemicals and concentrates.”