Lithium mining shares off to the races

SQM evaporation ponds in Atacama, northern Chile. (Image courtesy of SQM.)

Shares in lithium producers soared on Tuesday with the sector getting caught up in the investor enthusiasm for electric vehicle pioneer Tesla.

Tesla’s stock value has doubled since December, and the company is now worth more than Detroit’s big three automakers – GM, Ford and Fiat Chrysler – combined. Only Toyota surpasses Tesla’s market cap of $161 billion reached on Tuesday.

Shares in US-based Livent jumped 17% in more than double the usual trading volume. The company spun out of chemicals giant FMC Corp in November 2018 has nearly doubled in value from the lows hit last summer, and is now worth $1.6 billion on the Nasdaq.

Investors who bought into Livent’s IPO in November 2018 are still nursing losses of more than 40%

Investors who bought into Livent’s IPO are still nursing losses of more than 40%.

Top producer Albemarle gained 11% on unusually high trading volume, pushing the market value of the company to $9.5 billion in New York. Chilean giant SQM added 9.8% affording the company a market cap of $8.3 billion.

The advance in Tianqi Lithium’s stock was more modest, with the top Chinese producer up 4.5% at the close on the Shenzhen exchange. Punters bought and sold 162 million of the company’s shares on Tuesday, more than five times the daily average.

Tianqi bought 24% of SQM two years ago for more than $4 billion, but is now struggling to repay debt incurred during the boom years to fund its expansion. The company’s market value is $6.2 billion, half of what it was worth at its peak in October 2017.

Improved market sentiment also spilled over to Australia’s hard rock miners with Galaxy Resources up 5% and Pilbara Minerals jumping 9%. Shares in Brisbane-based Orocobre trading in Toronto added 2.45%.

Lithium price languishing

Orocobre and Pilbara Minerals last week joined others with bearish outlooks for lithium demand, as weak orders from electric vehicle makers in China look set to extend a prolonged downturn.

Prices for lithium fell again at the end of last year, according to the December price assessment released by industry tracker Benchmark Mineral Intelligence.

The Benchmark Lithium Index declined to its lowest point since January 2016 in December, down more than 36% on the start of the year. The weighted carbonate price fell to below $8,000 a tonne while hydroxide prices now average just over $10,000.

Hard rock miners were hardest hit when the price of spodumene concentrate (6% lithium for hydroxide manufacture) fell another 3.5% during October to average $450–$510 a tonne. That is a 45% drop in the last year.

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