Lithium mining stocks listed in Australia have surged in recent months, driven by the rising flow of news that point to a global megatrend taking shape around electric vehicles and power storage. 

Lithium is a vital raw material in the making of lithium-ion batteries that are at the heart of the megatrend.

The miners, including those racing from zero revenue to production, have seen the market fall hard in love with their stocks: 

Aussie 
miners

30 June 2017 stock price

13 Oct 2017 stock price

Market cap 
(13 Oct 2017)

Gain (1 July – 13 Oct 2017)

PE ratio (ttm)

Mineral Resources

A$10.85

A$18.02

A$3.38 b

66%

17X

Galaxy Resources

A$1.66

A$3.30

A$1.34 b

99%

25x

Pilbara Minerals

A$0.38

A$0.81

A$1.25 b

113%

--

Orocobre

A$3.47

A$5.00

A$1.06 b

44%

179X

Altura Mining

A$0.13

A$0.28

A$490 m

115%

--

Kidman Resources

A$0.61

A$1.31

A$457 m

115%

--

Neometals

A$0.27

A$0.35

A$190 m

30%

42x

Lithium Power

A$0.32

A$0.48

A$94 m

50%

--

Tawana Resources

A$0.20

A$0.35

A$153 m

75%

--

Alliance Mineral Assets

S$0.32

S$0.365

S$176 m

11%

--

Data: Bloomberg


Alliance Mineral Assets, the only lithium mining play listed on the Singapore Exchange, is clearly a laggard, having gained only 11% despite, among other things,

(1) substantial progress made in the development of its Bald Hill project in Western Australia with its first shipment of lithium concentrate set for March 2018,
(2) an offtake agreement achieved at record selling prices for its lithium concentrate, and
(3) substantial lithium and tantalum resources being reported and the prospects of significant upgrades in the future. 

The stock underperformance can be attributed to, among other things:
(1) investor sentiment being dampened after two trading suspensions (14 July-7 Aug and 26 Apr-4 May) of the stock and several trading halts, 
(2) online trading curbs on the stock by all local brokers with the exception of DBS Vickers, and 
(3) a court case, which sprang out of the blue, involving a claim by Jonathan Lim on a portion of the controlling shareholder's (Living Waters Mining) shares. 

A gem the Bald Hill Project of Alliance Mineral Assets (AMA) must be in the eyes of Burwill Holdings. Here's why:

1) In April 2017, Burwill signed an offtake agreement to buy a minimum US$200 m of lithium concentrate from the Bald Hill Project over 2018-2019.

2) Burwill agreed to prepay to fund the capex for the mine to start producing. Total prepayments paid: A$20.625 m.

3) In Oct 2017, Burwill agreed to become a substantial shareholder of AMA through a placement of new shares for 
A$19.575 m, giving it a 13.47% stake in AMA.

4) Burwill will extend a loan of A$4.8 m to AMA at 11% p.a. interest (probably the lowest rate for a loan without security in Australia).

Aside from raising uncertainties about management control, this case resulted in a rare court seizure (in July 2017) of shares to satisfy a debt of S$7 million owed to Jonathan Lim.

The court sheriff then started to sell an unspecified quantity of shares, which contributed in no small way to a downtrend in the stock price (from probably 32 cents to about 21 cents).

The sale, whose timing and prices of execution have not been made public by the court, is believed to have been completed recently.

If so, it would at least partially explain why AMA's stock price played catch-up, soaring 64% in the past 4 weeks (from 22 cents to 36.5 cents). 

construct10.17 @ Bald Hill Project of Alliance Mineral Assets: EPC contractor  Primero is making good  progress in constructing  the Dense Media Separation processing plant, with commissioning  expected in 1Q 2018.
Photo: Tawana Resources

Meantime, lithium stocks in Australia rallied, as investors turned more bullish on the prospects of a surge in demand for lithium as billions of dollars are invested in battery plants and as major automakers -- including General Motors, Renault-Nissan-Mitsubishi allianceVolkswagen, Volvo, and Jaguar Land Rover -- announced intentions or plans to switch to electric car production.

Very significantly, China -- the world's largest market for vehicles -- announced it planned to ban the production and sale of internal combustion engine vehicles. 

LQM 993300We're in the midst of a lithium-ion battery arms race around the world.
-- Simon Moore,
MD, Benchmark Mineral Intelligence. 

"Over the last three years, we've seen these lithium ion battery mega factories -- which are battery plants above one GWh capacity -- rise everywhere. It started with the Tesla Gigafactory in Nevada but now we have 17 of them worldwide and they continue to be popping up everywhere," said Simon Moore, managing director of Benchmark Mineral Intelligence.  


He was testifying before the US Senate Committee on Energy and Natural Resources Committee on 3 Oct 2017. The commmittee discussed "energy storage technologies and the supply chain risks and opportunities" (His written testimony is here.)


Watch video of Simon Moore's testimony -->



"And the key thing is not just the size of growth that we're about to see in the lithium-ion battery industry -- and we expect that to go from 80 GWh in 2016 to between 550 and 600 GWh demand by 2025 -- but it's the impact this is having on the raw material supply chains."

Cautionary note: While lithium stocks have done exceedingly well in recent months and over 1-2 years, you will find -- if you bother to check the price charts -- that they have experienced a lot of volatility. One reason is, most lithium listed companies are in various protracted phases prior to production and are, thus, loss-making and can be expected to do significant capital raising which will be dilutive to shareholders. Obviously, anyone investing in them should at least be aware of the associated risks.