Jack Colreavy, our Corporate Finance Associate, featured on ausbiz in an interview arranged by Hans Lee, producer and journalist, discussing battery metals.

Demand for batteries is driving a surge in the raw materials that comprise them, in particular lithium, nickel, and manganese. Jack says that while the lithium price has rallied from the 2020 lows, ASX lithium stocks have rallied too hard and are looking overvalued. For investors looking to gain exposure to the surge in battery demand, Jack suggests they look at manganese stocks which is probably the most underrated battery metal. Green hydrogen also offers an alternative way of storing renewable energy and will play a bigger role in financial markets in 2022. 

Will this battery element be the next lithium? 

Read the conversation:

Andrew Geoghegan:

"Well, let's stay in that sector in lithium is one of the hottest metals on the market. Thanks to that upsurge in electric vehicles, of course, it’s required for batteries used in electric vehicles and so it’s depleting the stock essentially of that material to take us through where the opportunity is. Jack Colreavy from Barclay Pearce Capital joining us now. Jack, good to speak to you. Let's start actually, what's going on with, Pilbara Minerals overnight. So this was the second option that’s taken place on the battery material exchange. Just explain to us how that played out."

Jack Colreavy:

"To be honest, I'm not fully across, what happened overnight. I haven't been able to fully come across it, but, I mean, it obviously speaks to the market of battery materials, especially lithium being such a key component in, batteries, especially for electric vehicles. So, I think that speaks to the space and the demand needed across it."

Andrew Geoghegan:

"Ok, Well, let's then take a look at the demand and supply pictures that stands with lithium. Of course, it came off significantly last year. That has thus impacted supply because production was then scaled down. Now we're seeing demand lift, particularly as we're seeing the demand for electric vehicles and obviously the batteries lift. So where does that place us at the moment?" 

Jack Colreavy:

"I think that's reflected in the price of lithium, which is come up substantially. It hit the lows in the second half of 2020, and it's starting to slowly climb back. It's above 15,000 us a ton. And, but it's still nowhere near the highs of, 2017 when it was in the mid sort of the twenties, and that sort of, again, speaks to the demand necessary. There's always going to be a supply and demand makeup to the environment and what this price action will do is will spur future minds to come online. And, I think there will be a change longer term as more supply comes online to keep a ceiling on the price."

Andrew Geoghegan:

"All right. So that said then how are you looking at the valuations particularly of that locally listed lithium plays?"

Jack Colreavy:

"Yeah, I think the market in general, on the ASX, a lot of them are priced to perfection. So, we don't see a lot of value in some of these lithium stocks. They have run very hard and there is the potential for the price to kind of hit that ceiling as more supply comes online. So we are a bit worried about, lithium stocks on the ASX. In that regard with it turning more towards manganese. Manganese is a bit of a forgotten battery stock, but it's a key component in the NCM chemistry, that being nickel, cobalt, and manganese. So, especially with cobalt a bit on the nose and battery makers looking to phase it out, manganese will have a better, bigger role to play going forward. And we see a lot of potential growth there in the future."

Andrew Geoghegan:

"Okay. Which companies are in that space at the moment to take advantage of the demand for manganese? Which I gather is also used to harden steel."

Jack Colreavy:

"Yeah. So low-grade manganese is used to harden steel. South 32 is one of the biggest manganese producers in the world. And that's a stock I really personally liked because it does have exposure to manganese, but also our aluminium, which is used in solar panels, nickel as well,  silver. So they've got a real *inaudible* range of exposure to the renewable energy sector in general. E25 is a really interesting one as well. Just in July, they had their first shipment of high purity manganese you used for cathode batteries and they're looking to expand production and also go into that zero-emission type manganese, which has proved really well for Vulcan Energy who were doing that in the lithium space."

Andrew Geoghegan:

"Alright. The other element of course, that you mentioned there, that metal, nickel, we've seen where that price has gone to recently seeing any opportunities there?"

Jack Colreavy:

"Look, unfortunately, I think nickel is a bit like the lithium stocks. That's really priced to perfection there. Nickel is near all-time record highs as well, and rightfully so, Tesla has said that nickel will be one of their key battery metals. And they see Australia as a key supplier in that space. So, again, looking towards value, we see more value in the manganese stocks rather than nickel or, lithium. And then, as I mentioned before, cobalt, we don't see a price future in that. And so we were tending to avoid stocks in that space."

Andrew Geoghegan:

"Okay. Jack, looking alternative than to the metals is actually hydrogen and I guess it’s still to be, you know, fully developed just as far as efficiency and pricing are concerned, but, what are you seeing any particular opportunity as far as green hydrogen is concerned?"

Jack Colreavy:

"Yeah. Green hydrogen is a huge, huge opportunity. It's in a very early stage at the moment. So, a lot of the key investments are happening in that pre IPO space. But, a lot of these companies are starting to mature and will hit public markets. I think 2022 will be a big year for green hydrogen IPO's at Barclay Pearce Capital. We're currently raising for Sweetman Renewables, which is in biomass to hydrogen space. Um, we work with Verdant Earth Technologies who are looking at a NASDAQ listing in Q4 this year. And then, we've also worked with Infinite Blue Energy who have one of the largest plants, currently in planning stages over in WA and they are looking at the ASX listing in Q1. So, there's a lot to come to the boards in 2022. And I think investors should be on the lookout for green hydrogen plays, into the future because Australia will be a renewable energy powerhouse in the production of renewable energy, and we’ll be able to export that production through green hydrogen, so, that’s why it is so important. Barclay Pearce Capital is putting together a panel discussion with some of the chairmen of some key green hydrogen companies this month."

Andrew Geoghegan:

"Alright, Jack we look forward to following that up, that conversation. Thanks so much for joining us, from Barclay Pearce Capital."

This interview was arranged by Hans Lee, producer and journalist at ausbiz.

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