Battery materials on the fly

Published at Nov 9, 2017, in Features

Strong price gains in the minerals used in lithium batteries are seeing some listed firms shine.

A former Saudi Arabian oil minister recently quipped “the stone age didn’t end for a lack of stone”. His implication was that the oil age may end before we run out of oil; and if you look at oil prices over the last couple of years, you may be inclined to agree.

With oil falling, the prices of the components of lithium-ion batteries have been rallying strongly. Lithium-ion batteries are some of the most energy dense batteries in common use, which means they are perfect for mobile energy store, such as the batteries in an electric vehicle.

Commodities like lithium, cobalt, nickel, and graphite are all important in the production of lithium-ion batteries, and they have thus enjoying strong price gains in recent history; as an increase in battery production has led to the demand of these minerals sometimes outstripping the supply.

Under these conditions, we have seen some materials explorers and producers perform very strongly. Lithium producers and explorers like Galaxy Resources, Orocobre Limited, and Lithium Consolidated Minerals Exploration (LCME), are all on strong uptrends in share price.

Graphite producers, too, are enjoying their time in the sun, with market leader Syrah resources rallying from a low around $2.20 a share in April of this year, to a high of $3.90 in October.

The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

A lot of the strong performance in both share and commodity price can be put down to either real, perceived or forecast shortages in these key commodities, due to an incredible increase in global battery production capacity.

Over the weekend, the West Australian published an article titled “WA in driver’s seat to power new lithium battery world”, but the reality is that Australia as a whole has a strong propensity to the production of commodities necessary for battery production.

Indeed, Australia’s strategic advantages in this space have not gone unnoticed, with a New York based consortium recently announcing a proposal for a $2 Billion AUD lithium-ion battery factory in Townsville, North Queensland.

Whilst it’s true that many of the firms in the battery materials now trade at fairly high earnings valuations, investors are likely looking towards future potential earnings, rather than current results. Similarly, if you had the opportunity to purchase shares in oil companies at the start of the 20th Century, you would most likely be happy paying a slight premium.

This article is General Information and contains only some information about some elements of one or more financial products. It may contain; (1) broker projections and price targets that are only estimates and may not be met, (2) historical data in terms of earnings performance and/or share trading patterns that should not be used as the basis for an investment as they may or may not be replicated. Those considering engaging with any financial product mentioned in this article should always seek independent financial advice from a licensed financial advisor before making any financial decisions.



S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

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