Liontown share price soars days after $50m taxpayer investment
Hopes for ASX-listed lithium stocks have risen after battery player CATL moves to mothball a major mine for at least three months.
The shutdown of a major lithium mine in China has lit a fire under Australian-based producers of the battery-making ingredient, including now part taxpayer-owned Liontown Resources.
The Liontown share price jumped 18.3 per cent to $1 on Monday, with the spike coming just days after the National Reconstruction Fund Corporation paid $50m for a stake in an equity raising at 73c.
Embattled Mineral Resources rallied 12.2 per cent to a six-month high of $38.12, while shares in lithium pure play Pilbara Minerals soared almost 20 per cent to $2.31.
All three stocks are among the most shorted on the ASX, behind only uranium players Boss and Paladin.
The lithium spike came on the back of reports from China that battery chemical giant CATL (Contemporary Amperex Technology) had halted production at a mine in China’s Jiangxi province for at least three months.
MST analyst Matthew Frydman said in a note to clients that the mining permit for CATL’s Jianxiawo operations was due to expire on August 9.
“The large operation in Jiangxi was the subject of a recent permitting crackdown notice from the local Yichun Natural Resources Bureau, along with seven other lepidolite operations,” he said.
“All operations must submit revised permitting documentation by September 30. Collectively the estimate for the eight operations is about 150,000-160,000 tonnes of lithium carbonate equivalent, more than 10 per cent of global supply.
“If the three-month time frame for the shutdown of Jianxiawo is correct, it implies to us that CATL don’t expect to receive renewed permits until more than a month after the September 30 submission date at the very least, raising question marks over whether the other seven operations may also have to enter a period of temporary shutdown post this drop-dead date.”
Macquarie analysts noted the Jianxiawo mine was high-cost and likely to be operating at a loss at current lithium spot prices.
Recent changes to China’s mineral resources law came into effect on July 1 and Beijing has reportedly cracked down on overcapacity across a host of industries, with mining under scrutiny.
Barrenjoey said Futures Daily, a reputable media outlet in the Chinese market, had reported the Jianxiawo mine closure.
“The shut of Jianxiawo was due to the expiry of its mining licence … which CATL failed to renew following the scrutiny over state control of strategic resources under the updated mineral resource law,” Barrenjoey analysts said.
“This highlights China’s push for rationalisation of domestic resource development and efforts to close up pre-existing regulatory loopholes in the development of strategic minerals.”
Tony Ottaviano-led Liontown last week raised $316m and issued new shares at 73c, including to Chinese battery chemicals player Canmax Technologies, which emerged with a near 2 per cent stake in the company.
Gina Rinehart’s Hancock Prospecting declined to participate in the raising and had its 19.9 per cent stake watered down.
The Australian reported at the weekend that Chinese billionaire Pei Zhenhua, a major shareholder in Hong Kong-listed CATL, and a substantial player in the supply of lithium hydroxide and carbonate in his own right, had visited Liontown’s flagship Kathleen Valley mine in WA in the past fortnight.
ASX-listed lithium stocks had a big one-day spike in September last year when CATL moved to shutdown Jianxiawo, but lithium prices continued to soften and the mine re-opened in February.
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