The exclusive 100Mt+ lithium club, is this company next?
A lithium list wouldn't be complete without Western Australia would it? In the final part of our lithium stocks to watch in 2024, we cover off Wildcat Resources
Western Australia really is 'God's country' when it comes to lithium, boasting some of the planet's largest lithium deposits and biggest mines.
Lithium prices are turning a corner. We covered this in part four of this series, and with the bottom now in, prices are poised to recover for the rest of the year. This sets the stage for the next WA success story to emerge.
The final stock on our list has the potential to be that success story. Not only does it benefit from a prime location and rising lithium prices, but it also sits on an approved mining lease with what looks to be a 100 million-tonne lithium resource.
Think back to those minnows that transformed into billion-dollar titans right here in Western Australia. It's happened before, and more than once.
The real opportunity here is that we're covering a company that was once a billion-dollar player during the last lithium boom. Now, it trades at a significant discount to its peak.
In our eyes, a stock trading at a discount to previous highs with a world-class discovery is a near no-brainer. Presenting…..
Lithium nirvana
If you had to pick one place on Earth to mine lithium, it would be Western Australia.
Wildcat Resource's Tabba Tabba deposit sits just 80km from Port Hedland, a major geographical advantage with the added benefit of a sealed road for easy access.
This translates to several key benefits:
The mine will have meagre transport costs to port once mining
Skilled workers with lithium experience practically on their doorstep
A state government eager to back critical minerals like lithium
Tier-one locations get mentioned a lot in Australia, but Tabba Tabba truly earns that label. A stone's throw away from a port in Western Australia, it doesn't get much better than this.
The exclusive 100Mt club?
Wildcat has yet to release the size of its lithium resource; it is still in the exploration phase. However, we expect the company will be targeting an initial resource above 100Mt.
Just how big is that? Only six other spodumene resources in Australia crack the 100Mt mark, and a mere ten worldwide. And that's including Azure Minerals even though they have yet to release a resource.
Four of Australia's six giants have attracted takeover bids in the past decade. If Tabba Tabba grows to the size we think it will, its strategic value – especially considering its location – could skyrocket.
On the fast track to production
Wildcat Resources has a significant advantage - their exploration is happening on a granted mining lease. That means no long and arduous permitting battles to start digging up lithium.
We see this as a big plus in today's competitive lithium market. Speed is crucial – the faster you build a mine, the faster you generate revenue.
While Tabba Tabba sits on a mining lease, the company must still get approval from the Minister for Environment for the environmental impact assessment. We don't see any hurdles here, but it must be noted.
The tenements are also pre-native title, meaning they require negotiations and agreements with the Nyamal people. We anticipate a smooth process, paving the way for Wildcat's operations.
The billion-dollar question
We like Wildcat a lot. It has all the signs of another WA lithium success story. The only sticking point the Equities Club team sees is securing funding for building the mine.
If a major player snaps them up, it's happy days. But if not, building this mine won't come cheap. Challenging market conditions - subdued lithium prices, high interest rates, and inflation - could create headwinds.
An example of this is Liontown Resources, a fellow WA lithium discovery. In 2020, they initially quoted $325 million for developing their lithium mine. But as they doubled the size of their resource, costs exploded – nearly quadrupling to over $1 billion. This highlights the potential financial hurdles Wildcat could face as their project develops.
Still, Wildcat has a lot going for it: massive deposit, a killer location, and an already-granted mining lease. Wildcat really does have a few aces up its sleeve.
Challenges may lie ahead, but with all these advantages, it's up to management to grow this lithium cub into the big cat we think it can be.