ASX News Live | ASX Opens Flat as Nasdaq Enters Its Second Bear Market

If you were keeping tabs of the conditional agreements and Memorandums of Understanding lithium developer Lake Resources (ASX:LKE) has signed, you’d notice Lake now has agreements for lithium exceeding its planned Kachi production capacity.

LKE’s April 2020 pre-feasibility study results mentioned an annual production target of 25,000tpa at Kachi from 2024.

But over the past year, LKE has signed:

• 25,000tpa non-binding memorandum of understanding (MoU) with Ford
• 25,000tpa non-binding MoU with Hanwa
• 25,000tpa conditional framework agreement (CFA) with WMC Energy
• 25,000tpa CFA with SK On

In January this year, LKE announced that Kachi’s base production case will rise to 50,000tpa in the upcoming definitive feasibility study and the final investment decision.

LKE said the DFS will be expanded to 50,000tpa due to anticipated increases in its resource estimates.

So under the initial PFS base case of 25,000tpa, LKE’s recent agreements exceed production capacity by 300%.

Under the revamped 50,000tpa case, LKE’s agreements still exceed production capacity by 100%.

How would this get resolved if LKE meets its conditions precedent and the offtake partners line up to receive Lake’s lithium?

Lake does have an aspirational target of reaching 100,000tpa production by 2030.

But that’s all the target is so far – aspirational.

Will the CFAs signed with WMC Energy and SK On take precedence over the MoUs signed with Ford and Hanwa?

Have the MoUs with Ford and Hanwa been mothballed by LKE’s management?

We will have to wait and see how these matters unfold.

The digital currency medium has a global impact that can be a force for unification but can also be a source of obsessive behaviour, greed, dysfunction, and social disruption. In that sense, cryptocurrencies can undermine confidence in existing currency systems even without displacing them.

Their existence has a hallucinogenic effect. Every affected party sees what he wants to see, and no two participants see the effects in quite the same way.

How do new and old forms of money — gold, CBDCs, SDRs, and cryptocurrencies — fit in the context of today’s global economy?

It’s an economy that is itself immersed in the effects of an electronic technological revolution and the third-worst pandemic in 650 years.

Since 2010, the major global economies have been engaged in a currency war involving repeated competitive devaluations of currencies in order to export deflation, import inflation, promote exports, and create export-related jobs.

This is a zero- or even negative-sum game that inevitably leads to trade wars, which began in 2018. These also accomplish nothing unless accompanied by internal infrastructure investment and growth-oriented policies.

Now a new phase that could be called ‘money wars’ has begun. It involves non-government cryptocurrencies competing with government money and governments embracing new sovereign digital money called Central Bank Digital Currencies (CBDCs).

CBDCs aren’t really new currencies but are new payment channels for existing currencies. The development of CBDCs enables the true elite agenda — the elimination of cash, confiscation of wealth through negative interest rates (difficult in a system that allows cash), and the perfection of the totalitarian surveillance State.

Cryptocurrencies, which are different from CBDCs, are also gaining wide acceptance. These cannot be analysed generically but must be sorted based on criteria such as anonymity, issuance cap, governance, permissioned versus permissionless systems, transaction speed, and liquidity.

https://www.dailyreckoning.com.au/cbdcs-versus-crypto-a-new-phase-of-money-wars/2022/10/12/

The OPEC Plus move to cut oil production has spiked oil prices, and it’s likely they’ll continue to rise. This undermines the efforts of central banks to mitigate inflation…so the oil wars are on. What does that mean for the global energy transition?

Prices at the pump have been going down…but they may not stay that way.

Last week the group of oil-exporting countries, OPEC Plus, got together.

The group of 23 countries controls about 50% of the global oil supply, so when OPEC makes decisions, it impacts prices. In fact, OPEC Plus has sometimes been referred to as ‘the central bank of world oil’.

It was their first face-to-face meeting since the start of the pandemic, and traders were expecting a big announcement.

And it was…kind of…I’ll get to that in a bit.

OPEC Plus announced that from November, they’ll be cutting oil production targets by two million barrels per day (bpd), or about 2% of the global oil supply.

Brent oil prices jumped right after the announcement.

OPEC says it’s looking to put a floor on oil prices, yet the cuts are coming after months of lobbying by US President Joe Biden to get them to increase their oil production.

Of course, it probably didn’t help his case that the US has been decreasing its oil imports from OPEC countries. Since the shale revolution, the US has been pumping more oil.

Or that the US, along with many other OPEC clients, has been looking to move away from oil and into renewables for energy independence.

Needless to say, Biden is ‘disappointed’. Mid-term elections are coming up, and it’s well-known that high oil prices don’t win votes.

Now there’s a lot of chat in the US about retaliation…

From whether to stop sending military supplies and arms to Saudi Arabia to reviving the NOPEC (No Oil Producing and Exporting Cartels Act) bill.

NOPEC would allow the US to sue countries in the OPEC for trying to limit the supply of oil to impact prices. But, of course, that would just make oil prices go higher.

What’s certain is that there’s an interesting global dynamic at play.

Central banks have been raising rates and tightening the strings to keep inflation at bay while oil producers are decreasing production, which will push up inflation.

Geopolitics are taking over global energy markets.

https://www.moneymorning.com.au/20221012/an-oil-price-dilemma.html

What determines shareholder value? What drives long-term share price performance?

The boring answer is the present value of a business’s sustainable long-term future cash flows.

Fundamentals matter.

Fundamentals exert a gravitational pull on price. In the end, price will orbit the stock’s underlying financials.

As the authoritative manual on valuation by McKinsey notes:

‘Relative value methods do not value directly what matters to investors. Investors cannot buy a house or car with earnings. Only the cash flow generated by the business can be used for consumption or additional investment.’

My fourth edition of McKinsey’s Valuation has a straightforward proclamation for investors (emphasis added):

‘Share prices are determined by long-term cash flows. To test the stock market’s time horizon, we examine how much of a company’s share price is accounted for by expected cash flows over the next several years. For a subset of S&P 500 companies, dividends expected in the first five years explained less than 9 percent of the market value, on average, another illustration of the market’s long-term view. Whether considering biotechs or the largest blue chips, investors value long-term cash flows.’

The arc of valuation is long, but it bends toward cash flow.

 

https://www.moneymorning.com.au/20221011/what-determines-share-prices.html

Private health insurance provider Nib Holdings (ASX:NHF) gave an update on its 1Q23 performance along with an announcement to raise $150 million via a capital raise.

Nib’s 1Q23 group underlying operating profit was $64.3 million, slightly up on 1Q22 UOP of $63.8 million.

NHF said revenue growth was up 6.5% after adjusting for Covid-19 givebacks.

However, group 1Q23 NPAT was $41.6 million, lower than the prior corresponding period’s $45.5 million.

The insurer cited “volatile financial markets” as a factor.

NHF noted that its Australian residents health insurance (arhi) business “continues to benefit from heightened demand”.

Nib attributed this to “lingering Covid-19 concerns, and difficulties in public system waiting times.”

Nib believes these factors highlight the “need for an even greater private sector role in healthcare.”

Edge AI chip developer Brainchip Holdings (ASX:BRN) was granted a new US patent by the US Patents and Trademarks Office for ‘An Improved Spiking Neural Network’.

BRN said it considers the patent a “valuable IP asset and increases the patent protection around Brainchip’s unique neuromorphic on-chip learning technology.”

Brainchip now holds 10 US patents with 27 patent applications pending in the US, Europe, Australia, Canada, and elsewhere.

BRN shares are currently up 2.5%.

Lithium developer Lake Resources (ASX:LKE) signed a conditional framework agreement (CFA) with SK On for the offtake of up to 25,000 tonnes per annum (tpa) of lithium from Lake’s Kachi Project in Argentina.

SK On is a South Korean battery manufacturer.

The CFA includes a 10% investment by SK On in LKE via the issue of new ordinary shares.

The key terms of the agreement include:

• “A strategic investment of a 10 percent stake in Lake (20 trading-day VWAP prior to 12/10/22)
• “Offtake of 50 percent of Kachi project lithium product up to 25,000dmt (LCE)
• “Initial five-year term plus option for a further five years
• “Offtake priced on an agreed market price formula based upon the average quoted price in the quotation period”

Like Lake’s recent CFA with WMC Energy, the conditional agreement hinges on LKE’s DFS, Lilac demonstration plant results, financial due diligence, and Kachi’s product specifications.

At this rate, we're going to sign a 25,000 tpa offtake deal with $LKE subject to something something

Lake so far has:
25ktpa non-binding MoU w Ford
25ktpa non-binding MoU w Hanwa
25ktpa conditional w WMC
25ktpa conditional w SK On

That's 200% of its expected 2024 production?

— Market Index (@MarketIndexAU) October 12, 2022

Queensland Pacific Metals is up 20% at market open on Wednesday following an offtake with General Motors.

QPM, a miner seeking to develop an energy chemicals hub in Townsville, entered a binding equity subscription agreement with automotive giant General Motors.

Under the agreement, GM agreed to invest up to US$69 million in QPM equity.

The equity investment breaks down into an initial investment of up to US$25 million and a FID investment of up to US$44 million.

As part of the initial investment, GM will subscribe for 174.6 million QPM shares at a subscription price of 18 cents a share, representing a 20% premium to QPM’s last closing price.

QPM Managing Director Dr Stephen Grocott commented:

“We are absolutely delighted to form this partnership collaboration with General Motors. GM’s strategic direction, company values and focus on sustainability in its pursuit of making electric vehicles for all is a perfect fit for Queensland Pacific Metals and our TECH Project. GM’s investment in our company and the associated offtake brings us one step closer towards construction of the TECH Project where we will one day aim to deliver the world’s cleanest produced nickel and cobalt. We thank GM for their support of our TECH Project and look forward to becoming part of the GM sustainably sourced raw material supply chain.”

 

The tech-laden Nasdaq Composite fell into a bear market, its second of the year.

Wall Street’s other major indexes — the S&P 500 and the Dow — are already languishing in bear markets, falling over 20% from recent peaks.

Furthering pressuring stocks are rising bond yields.

The yield on benchmark US government bonds is approaching 4%, with the 10-year US Treasury note yield rising to 3.938% overnight, its second-highest level of the year.