ASX Today — Live ASX News | XJO Rises; RBA to Meet on Tuesday

How are things going with the lithium boom?

Is there still money to be made?

Let’s find out…

Our first port of call will be the flagship stock on the ASX for this space: Pilbara Minerals [ASX:PLS].

PLS released its earnings on 24 February. Goodness me! It declared a $1.2 billion profit for the first half. The company also declared its first dividend.

You’d think that kind of result would get a mark up from the market.

Not so! PLS is down 6% or so from the day before it released its accounts.

What gives? Is this ‘as good as it gets’?

Hmm. I’m not so sure.

One confounding factor, at least as price action goes, is that one of its major shareholders just decided to sell out.

The company, CATL, sold a staggering $856 million worth of stock for a gigantic profit from its earlier investments.

The stock went ex-dividend last week too.

But what of the future?

The stock only trades on a P/E of about six if it can hit its forecast profit of more than $2 billion for this financial year and the next.

That, as ever, is the big ‘if’.

You and I know that depends on where the lithium spodumene price goes.

This has skyrocketed since 2020. But nothing lasts forever.

The Financial Times reported last month that pricing for lithium carbonate was weakening in China as concerns about demand rolled around.

We see this type of spook in commodity markets, like iron ore, all the time.

Lithium prices in China, as I understand it, have always been prone to big swings.

It’s also hard to see the long term as anything but bullish, either.

It’s not as if the switch to electric vehicles and renewable technology is going away any time soon.

Tesla recently held its investor day. Musk wants to make Tesla the world’s largest (by volume) carmaker, eclipsing Toyota.

Tesla, according to the report, has spent US$28 billion to get this far.

It will need to spend nearly US$150 billion more to sell 20 million vehicles a year.

Tesla’s chief financial officer is quoted as saying:

‘We may choose to vertically integrate into more things. We may find efficiencies elsewhere.’

That sounds a lot to me like the company could be interested in buying mining projects directly.

Could this be the cause of the unexplained jump in Liontown Resources [ASX:LTR] recently?

It’s possible, I suppose, though I have no idea how likely.

Tesla is still active in engaging with Aussie stocks too, by the way.

It was only the other week that speculative junior Magnis Energy Technology [ASX:MNS] announced a conditional offtake agreement with the electric car company.

(Admittedly, the market seems sceptical of the deal. The stock is down since. Hardly a ringing endorsement of the announcement).

I thought I’d check with any recent comments from ‘Mr Lithium’, US Advisor Joe Lowry.

He said recently, in part:

‘By the fourth quarter I believe it will be obvious that investors who worried about lithium demand in 2023 and focused on negative predictions for China without understanding the historic seasonality of the China market or had misguided concerns over Beijing’s management of subsidy policy or focused on the potential impact of a global recession and let those concerns overshadow the long term growth trend simply came to the wrong conclusion.’

Probably could have used a full stop in there somewhere…but thanks, Joe!

Senor Lowry also refers us to an acquaintance, Matt Fernley, who analysed the potential demand for raw materials as EVs take market share.

Senor Fernley tells us that:

‘Assuming that all of the 240,000GWh of cells were lithium-ion (which they won’t be, but just to illustrate the magnitude), that would mean a total requirement of c.160Mt of lithium carbonate equivalent (LCE). Given that current production is of the order of 0.7-0.8Mtpa of LCE, you can understand the magnitude of the bottleneck.

‘Let’s be realistic — there are other techs out there, particularly in the ESS space where there are flow batteries, sodium-ion, etc, but the magnitude of the likely demand increase for lithium-ion in general and lithium, graphite, phosphate, nickel and manganese in particular still looks off the scale.’

https://www.dailyreckoning.com.au/mr-lithium-says-this-boom-aint-done-yet/2023/03/06/

Bravura’s steeply discounted capital raise is not the only disappointing news for shareholders. On the same day that Bravura announced an $80 million capital raise at a 50% discount to its last closing price, the software firm also released its 1H23 accounts.

• 1H23 revenue was down 10.6% to $118.3 million
• EBITDA fell to a loss of $7 million, ‘significantly below the prior comparative period of $25.3 million’
• Loss after tax widened to $190.9 million, which included $175.9 million impairment charges for the intangibles of its Wealth Management arm

Source: Bravura

The bad news didn’t stop there.

Bravura’s outlook for the rest of FY23 is grim.

Bravura expects 2H23 revenue to be better than 1H23 but still ‘reduced from prior expectations’. The software firm also admitted ‘delays and uncertainties regarding two new material opportunities, including Colonial First Estate.’

While FY23 cashflow was originally guided to be ‘likely negative’, Bravura is now certain it will be negative.

Bravura also expects the trend of ‘lower existing and new project work post COVID in EMEA’ to continue.

Software firm Bravura Solutions (ASX:BVS) released both its 1H23 accounts and news of an $80 million capital raise.

The $80 million equity raising is fully underwritten and resulted in the issue of 200 million new shares, about 80% of the current issued capital of Bravura.

Quite the dilution.

The capital raise consists of a $23 million institutional placement and $57 million pro-rata accelerated non-renounceable entitlement offer.

The offer price for the placement and the entitlement offer is 40 cents per share, a 50% discount to Bravura’s last closing price.

Australian lithium developer Core Lithium (ASX:CXO) is up 7% in midday trade after announcing a ‘significant upgrade’ to its mineral resource estimate at BP33, a key deposit at its Finniss Lithium Operation in the Northern Territory.

BP33 is CXO’s second proposed mine at Finniss awaiting development approval.

BP33’s mineral resource estimate rose from 4.37Mt at 1.53% Li2O to 10.1Mt at 1.48% Li2O.

Core Lithium CEO Gareth Manderson said:

“This upgrade is a credit to our exploration and technical teams, who are systematically exploring the Finniss tenements while the business moves into production. These results provide further confirmation of the prospectivity of Core Lithium’s ground holding. Importantly, BP33 remains open at depth. Exploration to extend mine life at Finniss and identify growth opportunities is a priority for the business, with an expanded drilling program for CY23.”

Core Litium’s cut-off grade

CXO said the current mineral resource inventory for BP33 has been reported with a cut-off grade of 0.5% Li2O.

Core said this reflects the ‘current positive environment around lithium pricing and the increased prospects for eventual economic extraction.’

“The cut-off grade contemplates all costs associated with the processing and selling of a Li2O concentrate product and are all easily paid for by the 0.5% Li2O cut-off.”

A cut-off grade refers to the minimal estimated grade at which a deposit if economical to mine.

$CXO announced a 'significant upgrade' to the mineral resource estimate at BP33, a key deposit at its Finniss lithium operation. #ASX #ausbiz #lithium pic.twitter.com/WMOqKRE2ON

— Fat Tail Daily (@FatTailDaily) March 6, 2023

Neuromorphic AI technology developer Brainchip (ASX:BRN) is up 15% after announcing the ‘second generation of its Akida platform’.

Brainchip said Akida 2.0 allows ‘designers and developers to incorporate features that were not possible before’ on an edge device.

BRN chief executive Sean Hehir thinks this new platform ‘significantly extended our competitive advantage’.

In a jargon-heavy section, Brainchip listed the new capabilities of the Akida platform:

“The second-generation of Akida now includes Temporal Event Based Neural Nets (TENN) spatial-temporal convolutions that supercharge the processing of raw time-continuous streaming data, such as video analytics, target tracking, audio classification, analysis of health monitoring data such as heart rate and respiratory rate for vital signs prediction, and time series analytics used in forecasting, and predictive production line maintenance.

“These capabilities are critically needed in industrial, automotive, digital health, smart home and smart city applications. The TENNs allow for radically simpler implementations by consuming raw data directly from sensors – drastically reducing model size and operations performed, while maintaining very high accuracy. This can shrink design cycles and dramatically lower the cost of development.”

In FY22, Brainchip reported revenue of US$5 million and customer receipts of US$2.7 million.

In its FY22 report, Brainchip said customers representing more than 10% of revenues amounted to US$4.2 million.

On 5 December 2022, CNBC’s Jim Cramer urged his viewers to exit crypto.

He said:

‘It’s never too late to sell an awful position, and that’s what you have if you own these so-called digital assets.’

How’s that call going so far?

Check out the chart:

Source: Coinigy

Three months after Cramer’s call, Bitcoin [BTC] is up an almighty 41%.

Some altcoins are up by triple digits.

This fact might surprise you.

Especially if you only follow the mainstream news on crypto.

They’ve spent the last year (the last decade, if truth be told) saying how crypto was a ‘useless’ asset, a scammy industry, or worse.

Though, funnily enough, the one entrepreneur in the space they all seemed to get behind was this guy:

I mean kudos to them, I suppose.

They actually managed to back the biggest scammer in the entire crypto industry!

Like Cramer, these people are useful for their consistency in getting it wrong.

The cold hard truth is that the mainstream has never had its facts right about bitcoin or crypto.

And from what I’ve seen and read this past year, they’re not going to change any time soon…at least until it’s far too late for you to do anything about it.

For example, they’re not telling you any of this…

Big brands quietly make their moves

Nike, Adobe, Starbucks, Disney, Adidas, DraftKings, Mercedes, Meta, Reddit, and hundreds of other big-name companies are all actively developing blockchain-based products for their customers.

Disney’s CEO said:

‘We forget, in our generation, that things don’t have to be physical. They can be digital, and they have meaning to people. And as long as that meaning can be essentially substantiated in a blockchain, I think you’re going to see an explosion of things being created, traded, collected in NFTs.’

Elsewhere…

Vodafone, the seventh-biggest telecommunications company in the world, has plans to create a platform to connect the world’s devices — the so-called ‘internet of things’.

According to the company, it’s a US$12.6 trillion opportunity to radically change supply chains, point-of-sale financing, energy markets, and transport solutions.

And it’s also using blockchain technology, as you can see in this diagram:

Source: Vodafone

https://www.moneymorning.com.au/20230306/you-have-12-months-max-before-this-hated-asset-soars.html

Cancer diagnostics technology company Rhythm Biosciences (ASX:RHY) is down 50% after withdrawing its application with the Therapeutic Goods Administration for an Australian Register of Therapeutic Goods listing for its product ColoSTAT.

ColoSTAT is RHY’s blood test that aims to detect colorectal cancer.

RHY intends to submit a new ColoSTAT application with the TGA at a ‘date to be determined’ but expected in the ‘current calendar year’.

RHY withdrew its initial application after receiving questions from the TGA, which required ‘new internal analytical testing’ and ‘three different production batches of commercially made ColoSTAT test-kits from our overseas based manufacturer Biotem.’

TGA sought answers to its questions within 20 business days but the nature of the new analytical testing and the logistical challenge of ordering new test-kits from its manufacturer led RHY to withdraw its application and plan a re-submission later in the year.

In May 2022, Rhythm Biosciences filed its listing application for ColoSTAT and said then it was targeting ColoSTAT revenues ‘in late CY22’.

$RHY is down 45% after withdrawing its current ColoSTAT application for an Australian Register of Therapeutic Goods listing but plans to re-submit an application later in 2023. #ASX #ausbiz pic.twitter.com/gRksS1poVU

— Fat Tail Daily (@FatTailDaily) March 5, 2023

Underwhelming.

That’s how CommSec’s chief economist Craig James described the earnings season just passed.

Only 46% of the share prices of ASX 200 companies reporting earnings were higher on the day of the earnings release. The same result obtains if you extend to two days following the release.

CommSec reported that profits were generally lower as expenses outpaced revenue.

 

Analysis conducted by CommSec showed that aggregate profit of ASX 200 companies fell 30% over the year as expenses rose 15% while sales rose only 11%.

While 87% of companies reported a profit, only 41% saw that profit improve.

“Profit margins have come under pressure on the back of soaring operating costs, but many companies are reporting that input costs and overall cost pressures may have peaked (cited by a number of retailers). Businesses are also finding it challenging passing on higher costs to consumers, weighing on their earnings. That said, labour costs are still rising amid persistent labour shortages (cited by a number of companies – Breville notes a 21 per cent lift in employee costs).”

This week, especially Tuesday, is going to be jam-packed.

Today, the Melbourne Institute releases its inflation gauge.

And tomorrow the Reserve Bank meets to hand down its cash rate decision. Consensus has the RBA raising rates by 25 basis points to take the official cash rate to an 11-year high of 3.60%.

Tuesday will also see the release of detailed retail trade data, which will shed more light on the finances of Australian households.

On the same day, ANZ and Roy Morgan will release weekly consumer confidence data.

In fact, Tuesday will be very busy, as the US Fed’s Jerome Powell testifies to the US Senate Banking committee.

Following up the cash rate decision, our central bank head Philip Lowe will make a speech at the AFR Business Summit on Wednesday, elucidating the Bank’s cash rate decision.

And on Friday, US February nonfarm payrolls data will be released.

This will be eagerly anticipated by markets, as the Federal Reserve thinks more slack in the labour market is needed to really get on top of inflation.

Phew, that’s a big week!