ASX Today — Live ASX News | XJO Recovers After February Inflation Slows

ASX lithium stocks ended mixed on Wednesday, after Tuesday’s broad rally stoked by Albermarle’s rejected bid for Liontown Resources.

• Ioneer (ASX:INR) closed 5% lower
• Core Lithium (ASX:CXO) closed 4.4% lower
• Sayona Mining (ASX:SYA) closed 2.5% lower
• IGO (ASX:IGO) closed 0.8% lower
• Lake Resources (ASX:LKE) was unchanged
• Magnis Energy (ASX:MNS) was unchanged
• Liontown Resources (ASX:LTR) closed 0.8% higher
• Leo Lithium (ASX:LLL) closed 1% higher
• Pilbara Minerals (ASX:PLS) closed 2.3% higher
• Galan Lithium (ASX:GLN) closed 2.4% higher
• Piedmont Lithium (ASX:PLL) closed 2.5% higher
• And Allkem (ASX:AKE) closed 3.5% higher

 

Arafura Rare Earths (ASX:ARU) announced it received a non-binding letter of in-principle support from a German credit export agency for an untied loan guarantee of up to US$600 million to support Arafura’s Nolans Project.

The German credit export agency — Euler Hermes — is commissioned by Germany to execute loan guarantees to promote foreign trade and investment.

Arafura explained that an untied loan guarantee in this context aims to protect any potential Germany buyer of Arafura’s products:

“Untied Loan Guarantees protect lenders in foreign raw material projects from commercial and political risk and are a central component of the Federal Government’s raw materials strategy. Raw material purchases secured by a longterm supply contract between a foreign producer and a German buyer are eligible for cover. This guarantee is “untied” in the sense that – unlike Export Credit Guarantees – it is not tied to the provision of German goods and services e.g., capital equipment procurement.”

However, the key takeaway of the announcement was its conditional nature.

The loan guarantee is 1) non-binding, 2) indicative only, and 3) conditional on Arafura securing offtake agreements with German-based companies.

Arafura further qualified:

“Any final guarantee amount will be determined with reference to the offtake volume processed in Germany, final offtake structures with German companies and NdPr market conditions at the time.”

Lithium stocks are showing signs of life.

Yesterday, shares for Core Lithium [ASX:CXO] closed 15% higher, Pilbara Minerals [ASX:PLS] was up 12%, and Allkem [ASX:AKE] increased close to 14%.

The star of the day though — and the reason for the wake-up call — was Liontown Resources [ASX:LTR], who shot up a whopping 70%.

Shares moved after Liontown’s board rejected a $5.5 billion takeover cash bid from lithium giant Albemarle. Albemarle offered to pay $2.50 a share for the company, or an around 64% premium over Monday’s close price.

Liontown’s board response was thanks, but no thanks.

Not only did the board feel that the offer ‘substantially’ undervalued the company, but they even remarked on the ‘opportunistic timing’ of the proposal.

Liontown’s Kathleen Valley Lithium Project, which the company expects will be one of the largest lithium mines in the world, is expected to start production mid-2024.

And then, of course, lithium stocks haven’t been doing that well lately. In fact, there’s been plenty of shorting on lithium stocks like Liontown, that is, punters betting the stock price will fall. That’s certainly backfiring now.

But this isn’t the first time that Albemarle has tried to buy Liontown, who has supply deals with Ford and Tesla. Albemarle made offers back in October at $2.20 a share and at the beginning of March at $2.35.

Liontown’s share price sped past the offer price, closing at $2.57 a share yesterday.

But the entire ordeal shows that while lithium stocks have fallen out of favour recently, companies are still finding it hard to source lithium.

Lithium stocks have been bogged down all year after lithium prices cratered. As you can see below, the price for lithium carbonate in China has dropped dramatically since the end of 2022:

Source: Trading Economics

While lithium prices have been tanking, the big picture shows that producers are still selling lithium at higher prices than in 2020 and 2021.

And with carmakers pledging to make more EVs, battery costs having fallen, and a push to create battery supply chains outside of China, demand for lithium will likely continue to be a trend.

We’re going to need to build more lithium-mining capacity, but also refining capacity.

While lithium is mined mostly in Australia and Chile, most of the refining of lithium (about 60%) still happens in China.

And there are plans to build a refining capacity out of China to diversify the supply chain, but to also decrease bottle necks.

https://www.moneymorning.com.au/20230329/were-going-to-need-more-so-we-need-to-find-more.html

Aussie shares rebounded after monthly headline inflation slowed to 6.8% on an annual basis, a bigger drop than expected.

The All Ords was down as much as 0.30% in early trade before rebounding 0.40%.

The All Ords is now up a modest 0.7% at the stroke of midday.

The monthly consumer price index (CPI) indicator rose 6.8% in the year to February, 2023, lower than consensus estimates of 7.2%.

Australian Bureau of Statistics Michell Marquardt commented:

“This month’s annual increase of 6.8 per cent is lower than the 7.4 per cent annual rise reported in January 2023. This marks the second consecutive month of lower annual inflation, also known as ‘disinflation’, from the peak of 8.4 per cent in December 2022.”

Source: ABS

When excluding volatile items, underlying inflation fell more modestly.

February’s underlying inflation was 6.6% in the 12 months to February, slightly lower than the 6.8% annual movement recorded for January.

Source: ABS

Australia's February #CPI came in at 6.8% on an annual basis, lower than the 7.4% recorded in January.

This marks the second consecutive month of lower annual #inflation from December's peak of 8.4%. #auspol #ausbiz pic.twitter.com/sGr9puTnKA

— Fat Tail Daily (@FatTailDaily) March 29, 2023

Junior explorer Jervois Global (ASX:JRV) is down 30% after suspending final construction at its Idaho Cobalt Operations (ICO).

Jervois blamed ‘continuing low cobalt prices and United States inflationary impacts on construction costs’.

The decision to suspend will ‘prudently preserve the value of ICO’s ore body’.

How long will the suspension last?

Jervois thinks cobalt prices will rebound ‘over the medium term’ as the energy transition ramps up and ‘Western cobalt purchasers will increasingly prefer to buy from sources with Western ESG credentials, such as ICO.’

Yesterday, we covered Albermarle’s explosive bid for Australian lithium developer Liontown Resources (ASX:LTR), which propelled Liontown shares to an all-time high.

But Liontown’s announcement of Albermarle’s solicitations included the revelation that Albermarle courted the developer before — in October last year and earlier this month.

That raised questions about Liontown’s disclosure obligations.