Investors betting lithium has bottomed but recovery expected to be slow

Hold the phone, the lithium stocks are back in town. Trashed and bashed since mid-2023, the lithium space on the ASX has been the place to be in the last month.

In the past month, sector leader Pilbara Minerals (PLS) has bounced 31% higher while fellow producer Liontown (LTR) has notched up a 26% gain.

Among the developers, Patriot (PMT) has gained 31% and Wildcat (WC8) has put on 35%.

Greenbushes partner IGO (IGO) is the surprising laggard – because the operation is the world’s lowest cost producer - with a gain of “only” 14%.

The one-month gains for the lithium stocks is welcome stuff even if percentage rises only serve to highlight how beaten up the sector had become.

But take out IGO and the uniformity of the gains suggests the market is warming to the notion that no one dare speak up until now – the lithium market has bottomed.

Having said that, no one expects there will be a sharp recovery in underpinning spodumene/lithium prices.

Inventories are still high and China continues to sponsor production from low-grade operations.

While that sponsorship of low grade African and domestic production by the Chinese had the original aim of pulling down prices from the crazy heights of late 2022, it could well be that it is only continuing now because of growing fears of where future supply will come from to meet the undeniable growth in demand.

To that end, there is an interesting whisper around the traps that Beijing has ordered a delegation to go forth into lithium producing nations like Australia to step up activity around securing future supplies.

A lack of growth in demand is not something lithium suffers from. Demand growth from the EV sector was 26% in 2024. And demand from the emerging battery energy storage systems (BESS) sector soared by 51%.

Further out is the lithium demand boost to come from the army of humanoid robots that the investment banks and Elon Musk expect will arrive in factories and on our front doorsteps sooner than most think.

For the past two years it has been a case of massive demand growth meets critically low prices.

It is what Pilbara’s boss Dale Henderson last month described as the lithium paradox. “We’ve got market pain, but on the other side is the strategic gain,” Henderson said. Notably, Henderson has been a PA buyer of Pilbara stock.

It was a supply deficit that drove lithium prices to $US80,000/t ($US6,000/t for concentrates of the intermediate raw material spodumene) in late 2022. Recent price improvements put lithium carbonate benchmark pricing at $US8,580/t and spodumene at $US662/t for the 6.2% lithia material.

The latest prices continue to qualify as distressed pricing. But at least pricing and sentiment have turned for the better.

Patriot:

Former Pilbara Minerals boss Ken Brinsden has worked through cyclical lows in lithium previously.

Brinsden navigated Pilbara through a previous cyclical low to get first spodumene concentrates from its Pilgangoora project loaded on to a ship in September 2018.

In all, Brinsden led Pilbara for six years from 2016-2022 during which time the company grew from a $200 million lithium hopeful to a more than $6 billion producer by the time he left. It was time for a sabbatical.

But such was the buzz around a fast-emerging lithium discovery in the James Bay region of Canada, Brinsden cut short the sabbatical to get involved with the project owner, the now dual-listed Patriot.

Brinsden is now president and CEO of Patriot which owns the biggest and highest grade hard-rock lithium deposit (4.84Mt of contained lithium equivalent) in the Americas, the Shaakichiuwaanaan project (previously Corvette).

As big and as strategic as the project is, it hasn’t saved Patriot from the sector-wide bashing of the last two years. At 30c a share, it is trading at a fraction of what it was before lithium prices begin their 90% decline.

It is not alone there. But thanks to a healthy cash balance and support from the likes of VW, Brinsden has been busy advancing Shaakichiuwaanaan. It is well on its way to being one of the next tranche of lithium projects needed to meet the demand wave nobody disputes.

To that end, a definitive feasibility study into a staged development is expected late in this quarter.

Critical minerals:

Lithium is a critical metal that the US and the broader Americas need in quantity and with a high degree of surety if there is any hope of their auto industries and the BESS sector (batteries and renewable energy) being able to stave off the China challenge.

With its world-class scale, grade and hydro-power credentials, Shaakichiuwaanaan is clearly part of the solution. But wait there’s more.

Perhaps drawing on his need to innovate when the lithium market was being unkind to Pilbara in its early development stage, Brinsden has been busy building out a bigger critical minerals footprint for Shaakichiuwaanaan.

It is an ideal time to be doing so due to the US and China tariff war once again highlighting just how dependent the US and the rest of the non-China world is on China for the supply of a long list of critical metals.

Apart from the cache of building a one-stop shop for critical minerals at Shaakichiuwaanaan, the additional focus on what other critical minerals the project could produce in addition to lithium as valuable by-products has obvious revenue-boosting appeal.

It is more than a thought process at Patriot as Brinsden in the last month has flagged work programs aimed at unlocking tantalum as a high-value by-product in a future operation, as well as caesium.

Hard-rock lithium-caesium-tantalum pegmatites are nothing new. But not all LCT’s carry the grade/concentration/form of the pollucite-hosted caesium like those at Shaakichiuwaanaan do. This was recently confirmed by Patriot at one of its pegmatites (CV13).

The tantalum potential is what would be expected at a standard LCT. But the pollucite-hosted caesium potential is something else.

In its refined form, caesium metal used in a whole range of high-tech applications sells for $US2,540/oz. So it can be a high-value product all right, up there with gold.

But prices are much less for the larger volumes used in caesium’s main applications, including in drilling muds to complete oil and gas wells. Pollucite is the preferred host from which to recover caesium but pollucite deposits are rare.

So lots of caesium ticks for Shaakichiuwaanaan. Another is the large-scale potential of the caesium outlined in two zones at the CV13 pegmatite. The North American address does not hurt either as caesium is very much a critical mineral.

And it is one facing potential super-charged demand growth thanks to its role in perovskite photovoltaics in which caesium doping delivers major benefits. Perovskite PVs are a new challenger to the incumbent silicon-based PVs.

And when stacked together, the conversion of light to electricity is more efficient than the individual technologies.

Patriot did not mention the emerging technology in its announcement on Shaakichiuwaanaan’s caesium potential. It didn’t have to as there are plenty of boffins out there switched on to the prospect that the evolution of PV’s is going to require a lot more caesium.