Clean energy miner IGO has suffered like much of the sector over the last few months taking the stock’s decline from its November high to 29%, we should have sold more around $16 four months ago! Sentiment towards this nickel/lithium stock has not been helped by the move by some battery makers towards LFP batteries which will reduce the amount of the expensive nickel & Cobalt required to make battery cells e.g. EV market leader Tesla now uses LFP batteries in a portion of its vehicles.
- Cobalt has more than halved in under 12 months while nickel has slipped 33% over the last 6 months.
- Alternative purer lithium plays have also endured a really tough fall since November 2022 e.g. Allkem (AKE) -37%, Pilbara Minerals (PLS) -37%, and Core Lithium (CXO) -54%!
We have no doubt that the ESG space will enjoy another strong period but as we often say when sectors become overcrowded the end result is often fairly ugly as we see a washout of “weak longs”. In the case of the local ESG names we believe the washout is approaching its conclusion and solid risk/reward opportunities are approaching fast.
- In line with MM’s “buy weakness and sell strength mantra” through 2023 we are looking to increase our exposure to the Australian ESG space into current weakness.
- Our favourite stock for diversified exposure to ESG is Mineral Resources (MIN) around $75, now only 6% lower after the stocks -19% pullback.
MM is considering adding to our IGO position under $12
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