Bell Potter downgrades IGO to 'sell' on lower lithium prices
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The news: Bell Potter has downgraded its recommendation on IGO from 'hold' to 'sell' due to lower lithium prices and negative market sentiment towards the sector more broadly.
The numbers: Bell Potter slashed its 12-month target price on the mineral explorer from $7.60 to $5.15, as it reduced its average spodumene concentrate price forecast over the next year from USD1,400 ($2,075) per tonne to USD1,200. It also lowered its average lithium hydroxide forecast of the next 12 months to USD15,500 per tonne from USD24,000 per tonne.
Bell Potter conducted an analysis of long-term lithium prices, concluding that IGO's current share price implies long-term lithium prices of USD1,450 per tonne for spodumene concentrate and USD20,000 per tonne for lithium hydroxide, which are both "significantly higher" than current sport prices of USD1,000 per tonne and USD12,000 per tonne for spodumene concentrate and lithium hydroxide respectively.
IGO shares last closed at $5.70, and lifted 1.4% to $5.78 in early trading on the ASX. Over the last 12 months its shares have plummeted 61.92%.
The context: Bell Potter analyst Bradley Watson noted the "existing high degree of negative market sentiment around the lithium sector" more broadly and said there remained "considerable further short-term downside risk" to IGO's share price if sentiment deteriorated further.
The source: Bell Potter research
