Which ASX lithium stock offers the best value?
Which ASX-listed lithium stock offers the best value based on its market cap and mineral resource?
Mentioned
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.
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) |
|---|---|---|---|---|---|---|---|---|---|
Core Lithium | 2,110 | Finniss | Australia | Producer | 18/04/23 | 1.37 | 0.66 | 3210 | |
Leo Lithium | 631 | Goulamina | Mali | Development | 17/01/23 | 1.46 | 2.93 | 430 | |
Pilbara Minerals | 14,510 | Pilgangoora | Australia | Producer | 06/10/21 | 1.17 | 6.08 | 2385 | |
Liontown Resources | 6,600 | Kathleen Valley | Australia | Development | 01/04/21 | 1.38 | 4.42 | 1494 | |
Essential Minerals | 125 | Dome | Australia | Exploration | 20/12/22 | 1.23 | 0.26 | 478 | |
Sayona Mining | 1,960 | Moblan, NAL, Authier | Canada | Development | ~ | 1.16 | 1.89 | 1039 | |
European Lithium | 149 | Wolfsberg | Austria | Exploration | 01/12/21 | 1.03 | 0.25 | 601 | |
Global Lithium | 457 | Manna, Marble Bar | Australia | Exploration | 15/12/22 | 1.02 | 0.56 | 813 | |
Atlantic Lithium | 377 | Ewoyaa | Ghana | Exploration | 01/02/23 | 1.27 | 0.88 | 429 | |
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.
