Lithium

Pilbara Minerals and IGO are our preferred producers: Macquarie

Mon 24 Oct 22, 11:24am (AEST)
Mining put with a blue sky
Source: iStock

Key Points

  • Macquarie reaffirm Pilbara Minerals and IGO as its preferred lithium picks
  • A strong US dollar could help offset rising costs for downstream chemicals and battery makers
  • Pilbara Minerals announced another record auction result on Monday for US$7,255 a tonne

Macquarie says a stronger US dollar could help alleviate cost pressures for downstream lithium players and keep demand intact.

Chinese battery-grade lithium carbonate and lithium hydroxide prices have been setting fresh all-time highs on an almost daily basis in the past 2-3 weeks. Prices were mostly rangebound around the 500,000 yuan a tonne level for most of this year and broke out in late September.

Macquarie notes that carbonate and hydroxide prices rose a respective 1% and 2% week-on-week to 540,500 yuan a tonne and 532,500 yuan a tonne respectively.

"Despite the strong price performance, we highlight that many lithium products are cheaper in US dollars. Since March 2022, the Renminbi has depreciated 13% against the US dollar, which more than offset LCE price hikes over the last seven months," the analysts said.

Ever bullish on ASX-listed lithium miners

"Our preference for Australian based producers remains unchanged with Pilbara Minerals and IGO our key picks, offering strong production upside," Macquarie analysts said in a note on Monday.

Pilbara Minerals' Battery Metals Exchange continues to fetch higher bids for its lithium spodumene. On Monday, the company sold an additional 5,000 tonne cargo for US$7,255 a tonne compared to the pre-auction sale last week that sold for US$7,100.

"Mineral Resources remains one of our preferred stocks in the broader resources sector."

"Allkem offers unique exposure to both lithium brine in South America and spodumene production in Australia."

"Our positive view on Iluka is underpinned by strong zircon and pigment raw material demand ex-China and a shift into rare earths production," they said.

Macquarie retained an Outperform rating on all the stocks above, with the following price targets:

  • Mineral Resources: $98.00

  • Pilbara Minerals: $5.70

  • IGO: $21.00

  • Allkem: $20.00

Valuation upside for lithium miners Macquarie
Source: Macquarie Research

 

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Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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