Barry FitzGerald: The resource rumble is that the lead is dead. It’s just turning on
There is a misconception that lead is dead due to the rise of electric vehicles with their sophisticated lithium-ion batteries.
Far from it, and Garimpeiro believes it has opened up opportunities for investors willing to look beyond the noise of the lead’s demise.
About 85% of lead production is used in the production of the consistently reliable 12V lead-acid batteries found in internal combustion engine cars, as well as all electric vehicles – to manage safety and function auxiliaries where reliability is essential.
A market of $ 20 billion in 2020, the lead-acid battery market is expected to reach $ 32 billion by 2030, with demand for ICE / EVs and the renewable energy storage sector being the main growth areas. The demand for lead is increasing at the same time.
Most of the world’s primary lead (it is one of the most recycled metals) comes from zinc-lead-silver mines. But there are projects where lead dominates (with a silver boost), and there’s more to the ASX than you might expect.
The funny thing is that they’ve been largely overlooked lately despite the lead price hitting a three-year high due to COVID supply constraints and surging demand. lead-acid batteries as automakers around the world ramp up production from levels reached by COVID.
Lead last traded at US $ 1.05 / lb. That’s up 28% from the last year’s (calendar) average of 82c / lb.
This is in line with other base metals as the world responds to the massive economic stimulus unleashed in major economies to ensure economic growth in the wake of COVID.
As previously suggested, lead’s move to three-year highs and its favorable supply-demand picture has not been reflected in ASX stocks where lead is the dominant metal for companies. The same goes for silver which can be more than a prop to lead stocks.
Silver was last listed at US $ 26.30 / oz, which compares to last year’s average of US $ 21 / oz and its 2019 average of US $ 16 / oz. Thanks to the metal’s larger industrial applications, including solar panels, it has significantly outperformed gold which has been stable over the past 12 months.
Small-cap ASX leaders
Garimpeiro had a ferret and came up with three flagship ASX stocks that might be worth watching.
Galena Mining (ASX: G1A): Trading at 22.5c for a market cap of $ 104 million. Development of the Abra lead-zinc project in the Gascoyne region of WA. The expected annual production is 95,000 t of lead and 805,000 ounces of silver. The initial mine life is estimated at 16 years, but there is tons of exploration on the rise.
Japanese Toho Zinc is a 40% partner in the project which is expected to have a strong cash production cost of 44 US cents / lb.
Boab Metals (ASX: BML): Trading at 42.5c for a market cap of $ 66 million. It is working to make a development decision on its Sorby Hills lead-silver project near Kununurra, Washington in the second quarter of 2022, with production to follow in 2023. A high number of silver – the deposit contains 54 million ounces – helps reduce cash costs. production, expected at $ US40c / lb.
China’s Henan Yuguang – the country’s largest lead smelter and largest silver producer – is a 25% partner.
Rumble Resources (ASX: RTR): Trading at 52.5c for a market cap of $ 320 million. No surprises that Garimpeiro included this one. As previously mentioned, his discovery of Earaheedy zinc-lead (as well as manganese and silver) earlier this year has potential Tier 1 references that will take time to unveil.
An exploration target of 100-120 million tonnes at a combined 3.5-4.5% zinc / lead at shallow depth is the first target in progress, proving the discovery is something special.
Zenith Minerals (ASX: ZNC) is a 25% partner.