Lithium

Which ASX lithium stock offers the best value?

Mon 15 May 23, 11:55am (AEDT)
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Key Points

  • Which stocks offer the best value for money when based on lithium resource and market cap?
  • De-risked producers like Core Lithium and Pilbara Minerals fetch a higher price tag
  • Africa-based explorers such as Leo Lithium and Atlantic Lithium trade at a discount but have a long way to go

At its simplest form, investing in mining is all about who has the biggest resource with the best grades and the ability to extract it at the lowest cost.

In this series, we’ll be looking at which lithium explorers, developers and producers offer the best value for money based on:

  • Market capitalisation

  • Latest Mineral Resource Estimate

  • Lithium grades

To start the series off, we’re comparing ASX-listed hard rock players that have an existing Mineral Resource Estimate (MRE).

Which lithium stock offers the best value?

The table puts into perspective how much investors are paying for a tonne of lithium based on the company's resource and market capitalisation.

  • X-Axis: How much you’re paying for a tonne of lithium based on the company’s market cap (aka market cap divided by resource)

  • Y-Axis: Lithium grade

  • Colour: Green (producer), blue (developer) and yellow (explorer)

  • Bubble size: Size of resource

To put it simply, the more right you go, the more expensive.

2023-05-12 13 15 33-Lithium Bang - Excel
The graph is for illustrative purposes only and should not be used as investment advice (Source: Market Index)

Readers should also note the following points.

  • What's included in the data: The data uses the latest MRE and only includes Measured and Indicated Resource

  • Converting to LCE: All resources are converted to lithium carbonate equivalent (LCE) via the British Geological Survey's conversion ratios

  • Ownership: If a company owns 50% of a project, its LCE resource is halved

  • What's not included: The data does not take into consideration other factors that influence project economics such as geographical location, production costs etc. This means the data is a good starting point for comparisons but does not capture the full picture

And this is the data in table format:

Ticker

Company

Mkt Cap ($m)

Projects

Location

Status

MRE Date

Li20

Mt LCE

(A$/t LCE)

CXO

Core Lithium

2,110

Finniss

Australia

Producer

18/04/23

1.37

0.66

3210

LLL

Leo Lithium

631

Goulamina

Mali

Development

17/01/23

1.46

2.93

430

PLS

Pilbara Minerals

14,510

Pilgangoora

Australia

Producer

06/10/21

1.17

6.08

2385

LTR

Liontown Resources

6,600

Kathleen Valley

Australia

Development

01/04/21

1.38

4.42

1494

ESS

Essential Minerals

125

Dome

Australia

Exploration

20/12/22

1.23

0.26

478

SYA

Sayona Mining

1,960

Moblan, NAL, Authier

Canada

Development

~

1.16

1.89

1039

EUR

European Lithium

149

Wolfsberg

Austria

Exploration

01/12/21

1.03

0.25

601

GL1

Global Lithium

457

Manna, Marble Bar

Australia

Exploration

15/12/22

1.02

0.56

813

A11

Atlantic Lithium

377

Ewoyaa

Ghana

Exploration

01/02/23

1.27

0.88

429

PLL

Piedmont Lithium

367

Quebec, Carolina

Canada, US

Development

~

1.11

0.96

381

Market cap based on Friday's close (Source: Market Index)

Producer Premium: Pilbara and Core Lithium

Pilbara Minerals and Core Lithium have the most expensive price tags, at an average $2,798 a tonne. But they're also the only two producers in our data set.

Liontown is targeting its first production in mid-2024 and currently sits at $1,494 a tonne. Here are a few interesting observations:

  • Liontown has a 4.4Mt LCE resource, which is second only to Pilbara Minerals (on our data set)

  • Liontown has de-risked several aspects of its project including financing and construction progressing to schedule

  • This might sound obvious but only current producers have been able to take advantage of sky high prices from last year/earlier this year

The Mali Discount: Leo Lithium

Firefinch (ASX: FFX) and Resolute Mining (ASX: RSG) are two gold miners located in Mali. They tend to trade at a substantial discount relative to ASX-listed gold peers, largely due to being located in a rather unappealing and high-risk jurisdiction.

Leo Lithium has also fallen victim to the Mali discount. But its project is on track to deliver its first spodumene by the second quarter of 2024. It's also exploring direct shipping ore opportunities in the fourth quarter of 2023, for up to 90,000 tonnes.

Will the 'Mali discount' forever weigh on Leo Lithium's valuation? Or will the stock see some sort of re-rate when it hits production status and/or begins to show positive cashflows?

A Lot of Projects: Piedmont Lithium

Piedmont has been a little difficult to calculate as the company operates for projects with various levels of ownership:

  • 35% interest in Sayona's (ASX: SYA) NAL and Authier Projects

  • Option to earn 50% in Atlantic Lithium's (ASX: A11) Ewoyaa Project

  • 100% ownership of the Tennessee Project

  • 100% ownership of the Carolina Project

The data for Piedmont Lithium does not incorporate the potential Atlantic Lithium ownership.

Looking Ahead

Looking ahead, we'll be adding more stocks to the data set. As well as creating new data sets for other resources such as gold, copper and graphite.

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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