ASX News Live | ASX Down; Novonix, Syrah, Piedmont Surge as Atomos and Redbubble Sink

As someone working in the resource industry, I was on the receiving end of some friendly, but at times, intense neighbourly debates about the role of mining, its impact, and sustainability.

But it always seemed to boil down to climate change rather than mining itself.

The problem is most folks pushing hard for this energy transition just don’t understand the vast amounts of raw materials needed to make this change a reality.

Fossil fuels have been ingrained in the industrial fabric of our society for more than 100 years. It’s been the driving force behind everything we do from global conflicts to putting humans in space. Giving up our reliance on this economic lifeblood will NOT be an easy task. The costs will be extreme. And I don’t mean economically.

https://www.dailyreckoning.com.au/part-three-why-the-green-revolution-is-an-ecological-disaster/2022/10/20/

Have you heard of the ‘October Effect’?

It’s an old investment myth that leans into the idea that stocks perform worse in October. This is because some of the biggest market crashes in the US have happened during this month.

In mid-October 1907, we had the Bankers’ Panic — an event that led to the ninth-largest decline in US stock market history. Two decades later, on 24 October 1929, we saw a string of large sell-offs kick off the Great Depression. And on 19 October 1987, we, of course, had ‘Black Monday/Tuesday’: one of the first and most damaging global market crashes in market history.

Suffice it to say, October certainly has had its fair share of bad moments in investing history.

That’s why it has become a superstitious month to avoid for many traders.

But like I said at the start, in reality, it is just a myth. In reality, the October Effect showcases the weaknesses of our minds, not markets.

Let me explain…

A volatile month, but not a bad one

The October Effect panders to our brain’s fondness for patterns. We are all hardwired to identify and seek out patterns because that’s what has kept our species alive.

Unfortunately, for modern humanity, patterns don’t always provide the full picture…

When it comes to investing in the month of October, for instance, it is true that it is often a volatile period. According to research into S&P 500 data, there are more 1% or larger swings in October than any other month dating back to 1950.

But just because it is volatile doesn’t mean it is always bad.

In fact, more bear markets have ended in October than started. That means that right now may be a great time to buy, not sell!

Of course, I wouldn’t recommend relying on the past to predict the future. Instead, rather than looking for indicators from years past, all you really need to do is look at what is happening right now.

Because what you might not immediately realise is that there are still gains being made in the market. Despite the inflation and interest rate fixation, certain sectors continue to outperform.

All you really need to succeed in a bear market like this is the right direction…

https://www.moneymorning.com.au/20221020/avoid-the-october-effect.html

ASX BNPL firm Zip Co Limited (ASX:ZIP) released its September quarterly results on Thursday, with revenue up 19% year on year to $163.2 million.

Transaction volume for the quarter rose 15% YoY to $2.2 billion as ZIP’s revenue margin ‘remained healthy’ at 7.4%.

Zip was enthusiastic about its September quarter results, reporting continued top line growth and expanding customer base.

Zip co-founder and CEO Larry Diamond went so far as to say the BNPL stock is ‘moving towards positive cash flow’.

Zip’s key metrics for the quarter included:

• ‘Group quarterly revenue of $163.2m (up 19% YoY)
• ‘Transaction volume for the quarter of $2.2b (up 15% YoY)
• ‘Transaction numbers for the quarter of 19.6m (up 33% YoY)
• ‘Customer numbers 1 for the Group of 12.0m (up 50% YoY)
• Active customer numbers 2 at quarter end of 7.4m (up 17% YoY)
• ‘Merchants on the platform increased to 94.1k (up 70% YoY)
• ‘Revenue margin remained healthy at 7.4%
• ‘Cash transaction margin remained solid at 2.2%’

Zip said that at 30 September, it had $140.7 million in available cash and liquidity.

The fintech expects this to be sufficient to support it ‘through to cash EBTDA profitability’.

In Thursday’s update, Zip said it hopes to be cash EBTDA positive ‘during H1 FY24’.

Video equipment manufacturer Atomos (ASX:AMS) is down 30% on Thursday after raising roughly $8.5 million from institutional investors at a 33.33% discount to AMS’s last closing price.

AMS issued new fully paid ordinary shares at 10 cents per share.

Atomos shares are down 90% year to date.

Online art marketplace Redbubble (ASX:RBL) is down over 20% on Thursday after revenue and gross profit fell in Q1 FY23 as gross transaction value retreated in every region except North America, where it remained flat on Q1 FY22.

Redbubble’s Q1 FY23 metrics were as follows:

● ‘Q1FY23 Market Place Revenue (MPR) versus pcp down 5% to $100.8 million
● ‘Underlying MPR of $102.0 million, down 2%, up 45% since FY20
● ‘Artist revenue was $20.3 million, which is down 2%, up 49% since FY20
● ‘Gross profit (GP) of $39.4 million, down 7%, up 52% since FY20
● ‘Q1FY23 GP margin was 39.1%, down 90 basis points versus pcp
● ‘Q1FY23 Brand Investment of $3.8 million, versus NIL in pcp
● ‘Q1FY23 EBITDA and EBIT loss of $14.6 million and $17.0 million respectively’

Redbubble said its Q1 FY22 underlying MPR included $4 million of mask sales against $0.4 million in Q1 FY23.

That means, ex-mask sales, RBL’s underlying MPR rose 1.4%.

In addition, RBL’s gross transaction value fell 5% to $142.2 million on prior corresponding quarter.

Redbubble also saw a $18 million swing in EBIT. Q1 FY22 positive EBIT of $0.9 turned into negative EBIT of $17 million in Q1 FY23.

The EBIT loss saw the marketplace business end the quarter with a reduced cash balance of $74.9 million, down from $89.1 million at the start of the quarter.

RBL did say its cash usage peaks during the September quarter.

Redbubble defiant in FY23 outlook

Redbubble still expects ‘revenue growth’ in FY23, with one-off mask sales now ‘largely fully cycled.’

However, RBL did not quantify the expected revenue growth.

The marketplace was optimistic about its unit economics, arguing they remain ‘compelling’.

Redbubble said it will slow new roles but continue to invest in brand awareness. RBL forecasts its FY23 brand awareness to be between $8 million and $12 million.

Shareholders continue to pay the cost of not understanding the Redbubble business model. #ASX $RBL

Just because a company claims to have a flywheel, doesn't mean you should believe the spin!https://t.co/ZtygHwswB0

— A Rich Life (@ARichLifeAu) October 19, 2022

 

Lithium developer Lake Resources’s key technological partner Lilac Solutions — with whom LKE is in dispute over performance timelines — has been selected for a grant from the US Department of Energy.

The US DoE said its cost share will be US$50 million.

Lilac’s cost share will be US$129 million.

The grant is subject to negotiation of a definitive funding agreement.

Lilac Solutions Selected by U.S. Department of Energy for $50 Million Award to Unlock U.S. Lithium Production https://t.co/vm2hC1RcJe

— Lilac Solutions (@Lilac_Solutions) October 19, 2022

If finalised, the grant will fund Lilac’s project in Nevada, which seeks to “demonstrate the production of lithium at commercially relevant scales using the company’s IX lithium extraction technology.”

Lilac said it will demonstrate its extraction technology’s economic viability through:

“1. Demonstration of manufacturing of proprietary ion-exchange beads used by Lilac’s technology at commercially relevant scales,
“2. Demonstration of lithium extraction from domestic brine resources at commercially relevant scales,
“3. Collaboration with partner federally funded research and development centers and universities to maximize the positive impact of such projects on communities and the environment.”

LKE shares were down 2% at the time of writing.

Syrah Resources, Piedmont Lithium, and Novonix have been the beneficiaries of preliminary selection for grants issued by the US Department of Energy funded through the US$2.8 billion from the US Bipartisan Infrastructure Law.

The DoE released a fact sheet overnight with details about the projects selected for the grants.

US #DOE will invest US$2.8b in a "portfolio of projects that will support new and expanded commercial-scale domestic facilities to process #lithium, #graphite and other #battery materials…"

Projects include $SYR, $NVX, $PLL, and $LKE partner #Lilac Solutions. pic.twitter.com/KF85TwFj6x

— Fat Tail Daily (@FatTailDaily) October 20, 2022

Novonix grant details

Novonix’s wholly-owned subsidiary — Novonix Anode Materials (NAM) — has been selected for a US$150 million grant.

Importantly, however, DoE noted that Novonix’s cost share would be US$877 million.

Currently, NAM is constructing a production site in the US that is expected to produce 10,000 metric tonnes of battery-grade synthetic graphite per year.

Piedmont grant details

Piedmont is developing a lithium hydroxide project in Tennessee. At full production, the Tennessee site is expected to produce 30,000 metric tonnes of lithium hydroxide per year for the domestic EV market in the US.

The US DoE’s cost share — were the grant successful — would be US$142 million.

Piedmont’s cost share is slated for US$430 million.

Syrah grant details

Syrah is developing its integrated active anode material (AAM) facility in Louisiana, which will use natural graphite from SYR’s Balama operation in Mozambique.

Construction for the 11,250tpa facility is already underway.

DoE’s cost share is set at US$220 million.

SYR’s cost share is set at US$225 million.

US-based lithium developer Piedmont Lithium (ASX:PLL) has been selected for a US$142 million grant by the US Department of Energy to fund the construction of PLL’s US$600 million Tennessee lithium project.

The Tennessee project is slated to produce 30,000 metric tons per year of lithium hydroxide.

Piedmont CEO Keith Phillips commented:

“The US Government is putting investment dollars behind its policies to support energy independence and national security, and we are grateful to be selected to help spur critical, domestic development of the EV battery supply chain. Over 80% of lithium hydroxide production today occurs in China. This grant will accelerate the development of the Tennessee Lithium project as a world-class lithium hydroxide operation, which is expected to more than double the domestic production of battery-grade lithium hydroxide in the United States.”

Construction at the Tennessee project is slated for 2023. Production is expected to commence in 2025.

Battery tech stock Novonix (ASX:NVX) was selected to enter negotiations to receive US$150 million in grant funding from the US Department of Energy (DoE).

The potential grant will concern NVX’s anode materials division, with the US seeking to shore up synthetic graphite anode materials.

If NVX is successful in receiving the grant, it will have to match the amount.

Novonix CEO and co-founder Dr. Chris Burns stated:

“We are proud to have been selected to negotiate this funding in recognition of our readiness to accelerate the domestic battery supply chain and meet growing global demand from the electric vehicle and stationary grid storage markets.

“Since inception, our mission has been to enhance batteries through innovation and pave the way for the clean energy transformation. We are excited to partner with the DOE to further our mission of establishing a domestic supply chain for synthetic graphite used in lithium-based batteries and creating long-term sustainable value for our stakeholders.”

The US is seeking to shore up critical battery metals and wean itself off China in pursuit of critical minerals independence.

Novonix noted that China currently dominates both the synthetic and natural graphite markets with 98% and 77% market share respectively.

Source: Department of Energy

Graphite producer Syrah Resources (ASX:SYR) — who is developing a downstream processing facility in the US — has been selected for a US Department of Energy (DoE) grant of up to US$220 million.

SYR said the grant will go towards financing its Vidalia active anode material facility in Louisiana.

If the grant comes through, it will fund a “significant proportion of estimated capital costs for Vidalia’s expansion.”

Syrah, DoE’s Office of Manufacturing and Energy Supply Chains, and the Office of Energy Efficiency and Renewable Energy intend to negotiate a binding funding agreement to finalise the grant.

Unsurprisingly, the grant depends on Syrah meeting certain conditions precedent, with funds distributed in stages upon achieving certain milestones.

SYR said it will be required to match funds advanced from any DoE grant.

Battery metals stocks Novonix (ASX:NVX), Syrah Resources (ASX:SYR), and Piedmont Lithium (ASX:PLL) are surging on Thursday, bucking the wider market, after receiving grants from the US Department of Energy (DoE).

NVX shares are currently up 23%.

SYR shares are up 13%.

And PLL shares are up 11%.

The grants come after the Biden administration announced overnight it will be awarding US$2.8 billion in grants to boost US production of EVs, batteries, and battery metals.

Announcing the grants, US President Biden said:

“By undercutting U.S. manufacturers with their unfair subsidies and trade practices, China seized a significant portion of the market. Today we’re stepping up… to take it back, not all of it, but bold goals.”

"Today, President #Biden is announcing that the Department of Energy is awarding $2.8 billion in grants from the Bipartisan Infrastructure Law to 20 manufacturing and processing companies for projects across 12 states."#BatteryMetals #EVshttps://t.co/xApDwaLpgh https://t.co/BO2O0UllvK

— Fat Tail Daily (@FatTailDaily) October 20, 2022