Investors charge to sector amid driving demand for key battery metal

Investors charge to sector amid driving demand for key battery metal

Date of Report: Market close on Tuesday, 29th March
ASX: JRLPrice: $3.02

52 Week Range: $1.60 - $4.05

Market Cap: $162.31M

Sector: Materials

Every second week we invite a leading fund manager to present at The Insider: Meet the Fund Manager. In November, Samuel Berridge, from Perennial Partners, selected Jindalee Resources as one of his three favourite stocks, noting the business owns one of the US’s largest lithium resources and is planning further exploratory work.

5th November, 2021

2nd February, 2022

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As supply chain nightmares and a brewing war in Europe bid up fuel prices, consumers have rapidly turned to electric vehicles – but they’re now facing issues of their own, with demand for a key battery metal outstripping supply.

Lithium is a vital ingredient in the batteries used to power electric vehicles and its price has surged almost 500% in the past 12 months amid growing demand – a sustained rally that has car manufacturers worried.

Investors have poured money into the sector in response, with pre-revenue explorers seeing a 47% increase in cash inflows (up to $3.75 billion) in the last three months of 2021.

That money has helped the sector set new spending records on drilling activity, while the ASX itself is boasting the largest number of pre-revenue lithium explorers on its books in six years.

Though investors might be spoiled for choice under current market conditions, Perennial Partners’ portfolio manager and resources analyst Samuel Berridge highlighted Jindalee Resources as one player in this space to watch.

The company’s flagship asset, the McDermitt deposit, is a low-cost lithium mining operation located on the border between the US states of Oregon and Nevada, with indicated and inferred resources of 1.43 billion tonnes of lithium at 1320 parts per million.

Its significant size makes it the second-largest lithium project in the US, behind Lithium America’s Thacker Pass mine located just south of Jindalee’s own project.

Mr Berridge noted that although Thacker Pass had recently dethroned the McDermitt deposit as the largest in the country, Jindalee has only done “a fraction of the drilling” that Lithium America has completed.

“I’m sure once we see the rigs start turning again, that resource is going to get bigger still,” he said.

More importantly, Mr Berridge said additional exploratory work will help the company better explain itself to investors, noting that ASX rules around resource measurements have so far meant the company cannot legally provide the transparency would-be shareholders desire.

“A large portion of their resources are still in the ‘inferred’ category, and that means under ASX rules they can’t disclose the financials of their project, be that the NPV [net present value] or the OpEx or CapEx or all those metrics investors are very keen to see,” he said.

“Once they convert that very large inferred resource into having a slightly higher indicated component, they can run those financial metrics again and disclose them to the market.

“When they do, I expect we’ll see a very healthy NPV, certainly relevant to this company’s market cap.”

Jindalee Resources CEO Karen Wellman said the business is strategically positioned to benefit from recent efforts by the Biden administration to domesticate production of battery minerals.

US lawmakers have sought to stimulate local critical minerals production in a bid to shore up supply chains, which currently rely primarily on China.

“We have bipartisan support for US critical minerals projects, which include lithium,” Mrs Wellman said.

“Biden’s pledge for zero emissions by 2050 has really helped accelerate the electrification of the US, and strengthened their desire to establish domestic supply chains, which is why we believe McDermitt is strategically positioned.”

Click here to view more videos from Samuel Berridge’s  Meet the Fund Manager’ session, or click here to view the full ‘The Insider: Meet the CEOs’ session.

The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.

Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.

The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.

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The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.
Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.
The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.