Metalicity (ASX: MCT) - Unique Zinc and Lithium Exposure

Gavin Wendt

Metalicity is one of the rare ASX-listed situations that offer investors exposure to both zinc and lithium. Why is this interesting? Well, zinc was the second-best performing commodity last year (up 88%), behind only coking coal (up 250%). Zinc is being driven by major supply-side factors in the form of ageing mines and a dearth of new, large-scale replacements. Lithium is an intriguing commodity because of a vast wave of demand growth, predominantly related to the burgeoning electric vehicle market. End-users want security of supply and Australia is better placed than most of its geo-politically challenged competitors (like South America) to be able to deliver. Which is why Metalicity is such an interesting proposition. In zinc terms it owns the vast Admiral Bay deposit in WA, one of the world's largest undeveloped deposits. In lithium terms it maintains highly prospective acreage in the Pilbara - one of WA's best lithium addresses. Metalicity is up more than 200% since our initial coverage at $0.025 in Oct 2015, but its unique zinc-lithium exposure should help drive further strong interest during 2017.


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Patrick Fresne

There is an indirect connection between the rising zinc price and rising lithium price: the metals lead and zinc are almost always found together, so a large chunk of the world's zinc output is a byproduct of lead mining. However lead mines have been closing in recent years, partly due to the 'battery wars': the most significant industrial use of lead is in the manufacture of lead-acid batteries, but the lead-acid battery has been falling out of favour due to competition from lithium-ion batteries. As result of the increased competition, the lead price has been weak in recent years, and lead mines have been closing, which in turn impacts the zinc supply, given these two metals tend to be found together.

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