The small caps that lit a fire under our experts this week

Luke Laretive

CEO & Investment Advisor

Luke Laretive’s has his eyes set on lithium at the moment, with spodumene prices having strengthened to above US$4,000/t, and ASX lithium share prices have followed suit.

Although down from their lofty ~US$6,000/t heights achieved in late 2022, prices are still well above long-term analyst consensus, Laretive says.

“Over the last few years, most brokers and analysts forecast have underestimated actual lithium prices.

“This was epitomised in January of this year when lithium ‘perma-bear’ UBS upgraded its lithium price forecasts by up to 50% admitting that they had previously underestimated demand from North Asian battery makers and electric vehicle buyers,” he explains.

Laretive says the lithium sector is running hot again and this is demonstrated by the appreciation of lithium shares in companies such as Patriot Battery Metals (ASX:PMT) – which has seen a 132% surge year to date on anticipation of a maiden resource estimate – and Delta Lithium (ASX:DLI).

“Delta Lithium is up 83% year to date and has caught investors’ attention with the prospectivity of its Yinnetharra project, in addition to their near shovel-ready Mt Ida project in the gold fields of Western Australia,” he explains.

“The other factor supporting the share price is the news, confirmed by DLI, that resources heavyweights Hancock Prospecting (Gina Rinehart) and Mineral Resources have been buying shares of DLI on market, amassing stakes of 2-3% respectively.”

But when it comes to hard rock lithium, Laretive says the Greenbushes project in Western Australia is the pre-eminent hard rock lithium deposit globally.

“Greenbushes is the largest hard rock lithium mine in terms of both scale and resource grade, and IGO Limited (ASX:IGO) owns 25% of it through a joint venture,” he says.

“Grades verging on 2.0% Li2O are up to 50% higher than the ASX peer group.

“For reference, lithium spodumene concentrate prices are currently in the ~US$4000/t range, providing a healthy margin of safety and near-term cash flow generation opportunity for IGO.

“IGO shares have appreciated 11% since 1 January 2023 and may have more upside over the medium to long term.”

Original article for Stockhead: