Good morning all,
Great post
@Dr_Manhattan and agree that the Lithium oversupply narrative is about cooked and the Morgan Stanley's of the world have achieved their dream targets for much lower prices across the sector. i.e. before Lithium 2.0 begins to build momentum.
As your chart so eloquently illustrates, your selection of the main ASX listed Lithium players shows that the sector wide downturn may have peaked, with encouraging signs of a lasting reversal. KDR is leading the charge and if the others follow suit then the next couple of months should be good for the sector i.e. before tax loss selling kicks in. IMO we will then see some exciting growth during the second half of this year, due to Lithium demand growth shockwaves (smashing analyst forecasts) and the accelerated emergence of EVs and Gigafactories placing renewed pressure on an optimistic Lithium supply growth narrative.
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Your chart also highlights the AVZ's abysmal performance since the highs of Jan 2018, and the worst out of the dozen stocks you've illustrated. But as you'll see, AVZ's extremely poor performance is not limited to just 11 peers over one timeframe, indeed it has overshot to the downside over multiple timeframes (refer charts below) and is the worst performer against
all pure play Lithium developers and / or producers listed on the ASX.
The list of stocks that I've included in the below charts include 29 ASX listed developers / producers and 'The Big Three' global lithium producers (ALB, FMC and SQM), and they are all refenced against the Global X Lithium ETF (black line). Note that I have not included junior Lithium explorers, particularly the ones that don't yet possess any type of confirmed resource (at least of a significant kind).
Also note that AVZ's SP movement and performance is highlighted in green, and the red dashed line represents a 100% gain from the recent SPP and placement at 3.8c. In a post yesterday, I mentioned that I believe the 6.7c (75%) - 7.6c (100%) range is a logical and achievable short term target, given the gap on the chart that exists at 6.7c and the probability that Patto's will want to massage the SP (on the back of impending company updates) to bank a 75% - 100% profit, and at the same time ensure that all 15 million options allocated to them are in the money.
Figure 1. 18 month performance chart
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Figure 2. 12 month performance chart
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Figure 3. 6 month performance chart
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Final note: IMO further updates including the 5/10mtpa SS, an upgrade to the measured and indicated JORC resource categories and confirmation of the preferred transport route may be released in time to provide fuel for a significant SP rally over the next 6 weeks or so, and that may entice Huayou to convert some or all of their 10c options with an expiry date of 15.04.19.
Conversion of all 214,285,714 options due to expire on that date would provide the company with an additional $21 million, and IMO this would fulfill the company's OPEX and exploration requirements for at least another 12 months while it delivers a remarkable DFS (IMHO) and secures the necessary CAPEX to complete construction and commence production. By no means am I convinced that Huayou will convert their April 2019 options, however if the impending updates are exceptionally good then conversion remains a possibility in the coming weeks and certainly worth keeping a watchful eye on.
GLTA
Cheers
Elpha
