Wildcat Resources (ASX: WC8) shares are down 18%. It’s not anything that the company itself has done it’s rather a reconsideration of the whole sector. There’s a lot more lithium out there than people thought - more to the point a lot more people are finding a lot more of it than was generally thought likely. This could be just a near term issue, therefore something that won’t affect WC8 shares all that much. Our own opinion - long stated - is that it will be a long term issue instead.
The particular issue: “Lithium miners Albemarle (NYSE:ALB), SQM (NYSE:SQM) and Livent (NYSE:LTHM) all closed lower in Monday's trading - -5.2%, -4.6% and -3.1% respectively - extending sharp YTD losses as prices come under increasing pressure due to concerns of declining near-term demand and oversupply……That's on top of a raft of recent negative commentary, including at Bank of America, where analysts said they "expect to see a period of earnings and margin pressure across the value chain," as the lithium market balances shift to adequately supplied in 2023 and oversupplied in 2024-25.”
Now, there’s little doubt that Wildcat has found something of value: “Wildcat Resources Limited (ASX: WC8) (“Wildcat” or “the Company”) is pleased to present its Activities
Report and Appendix 5B for the period to 30 September 2023. The Company announced a major lithium discovery from its maiden drill program at the Tabba Tabba Lithium Project near Port Hedland, WA on 18 September 2023, and completing more than 21,000m of
RC drilling at the project during the September quarter. Tabba Tabba is proximal to port, and most significantly, located on granted Mining Leases. Having entered a binding agreement to acquire Tabba Tabba in May 20231, conditions precedent for the Tabba Tabba Tenement Sale Agreement were satisfied subsequent to the end of the September quarter.”
There’s definitely lithium there, Wildcat owns it, this is why WC8 shares have been up 1,200% this year.
Wildcat Resources share price from Google Finance
Of course, most of this information we’re getting from Wildcat Resources in real time. Confirmation of lithium content and so on. Really, we’re just waiting for news on the extent of the find at this stage.
However, like any miner Wildcat is a commodity producer - a price taker. And if lithium is moving into oversupply then that price is falling - as it is indeed falling. This takes the edge off the WC8 share price, obviously enough. With one more wrinkle. The current estimates of oversupply are a couple of years in the future. Which is before Wildcat might be producing and therefore could be thought to not affect them. Our own view is that there’s so much lithium being found that the oversupply, and thus weak price, is going to extend off into that medium term future - and therefore so are weak prices. We’ve long said we’re bear the lithium market for the long term.
