Barry FitzGerald: Wildcat Resources has a target on its back after bottom of the market lithium takeovers

Barry FitzGerald says if the consensus has gold and uranium stocks leading the way in 2025, lithium could surprise.

If gold and uranium are in vogue, maybe the real value will be made elsewhere. Pic: Supplied/Stockhead

“Garimpeiro” columnist Barry FitzGerald has covered the resources industry for 35 years. Now he’s sharing the benefits of his experience with Stockhead readers.

It is quite the fashion in 2025 outlook pieces on the resources sector to settle on gold and uranium stocks as the place to be.

Gold and uranium are likely to do well but as all and sundry are making the same call, Garimpeiro wonders if there is not better value to be had elsewhere.

It’s why he reckons lithium stocks could be the go after what proved to be a calamitous 2024 due to lithium prices being smashed.

Lithium prices are at or near the bottom and equity markets aren’t going to start re-rating lithium stocks until there is a meaningful improvement in the underlying commodity.

But in the meantime, the broad thematic surrounding lithium has not gone away.

Demand picture

Despite current oversupply depressing prices, demand for the key battery material is set to grow from 1.2Mtpa currently to 3-3.5Mtpa by 2030 and will continue to grow as the world’s cars go all electric and battery storage of renewable energy takes off.

A whole new fleet of lithium mines needs to be developed to help meet the demand scenario and it is not going to happen unless lithium prices return to more development supportive levels.

The short-termism of equity markets seems to have forgotten that lithium has the biggest growth demand profile of all of the commodities and is pricing lithium producers, developers and explorers as if the current price weakness is a permanent thing.

Industry has a different take. Its longer term view is that lithium demand will swamp supply in coming years, leading to the prospect of a potentially profound supply deficit well before the decade is out.

By industry, Garimpeiro is talking about both the mining industry and groups further along the battery supply chain. They have a better sense of what is coming  and are positioning themselves accordingly.

Big name buyers

There are two good examples of just that in recent weeks. Rio Tinto (ASX:RIO) has made a $US10 billion plunge in to lithium with its takeover bid for ASX-listed Arcadium Lithium (ASX:LTM) and it has earmarked another $US2.5 billion for the development of its Rincon project in Argentina.

Then there was German auto giant Volkswagen moving to secure future supplies by taking up a 9.9% equity position in ASX and Toronto-listed Patriot Battery Metals (ASX:PMT) as part of a broader deal over spodumene supplies from a future development of Patriot’s Canadian project.

Both the Rio bid for Arcadium and the equity component of VW’s deal with Patriot were done at premium prices to the market. In the case of Arcadium, Rio is offering a 90% premium to the pre-bid market price. VW’s entry price in to Patriot was at a 67% premium.

So industry in one form or another, with a longer term perspective than equity markets, reckon equity markets have got lithium stock valuations seriously wrong to the downside.

It is a disconnect between industry’s thinking and where the equity markets are at when it comes to the outlook for lithium and lithium company valuations.

So heading in to 2025, Garimpeiro reckons lithium could well prove to be a better bet than gold and uranium.

Wildcat bounce

To that end he went looking in the beaten up ASX lithium space during the week for a stock currently suffering from the general rout in lithium stocks but with the right sort of credentials to benefit in the near term if the likes of Rio and VW are right in their assessments or where lithium markets are headed.

He settled on the wonderfully named Wildcat Resources (ASX:WC8) , trading mid-week at 20c for a market cap of $260 million (undiluted). Like the rest of the sector, Wildcat’s share price is a shadow of its former self.

Still, the company recently confirmed Tabba Tabba in the Pilbara as a world-class hard rock discovery weighing in at 74.1Mt grading 1% lithia. It’s the biggest undeveloped deposit in the country on a reported resource basis.

Tabba Tabba’s scale puts it in elite company as “industry” sets about putting in place the building blocks required to meet the wave of demand coming at lithium, notwithstanding current prices.

Euroz Hartleys has a 70c share price target on Wildcat (December 6) and in November, Argonaut included Tabba Tabba as a “special mention” project in its annual Best Undeveloped Projects survey, also with a 70c price target.

Adding spice to the Wildcat story is the presence of Mineral Resources (ASX:MIN) with an 18.8% shareholding, the bulk of which was acquired in a block trade in November last year at 85c a share.

MinRes is a 50% partner in the big Wodgina lithium mine some 87km by road from Tabba Tabba. In its glory days, MinRes would be considered an obvious buyer of Tabba Tabba in a Wildcat takeover bid.

That’s not so certain nowadays but remains a possibility. Failing that, MinRes stands as a  kingmaker should corporate/industry interest in Tabba Tabba/Wildcat from elsewhere eventuate.

As Wildcat continues its methodical approach to getting Tabba Tabba in to production by moving it through the feasibility study stages, it will be in line for a re-rate, particularly in an improving lithium market.

That’s doubly so should Wildcat attract a takeover. There just aren’t that many projects with Tabba Tabba’s credentials in a tier 1 location.

The views, information, or opinions expressed in  this article are solely those of the columnist and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.

Originally published as Barry FitzGerald: Wildcat Resources has a target on its back after bottom of the market lithium takeovers