The global lithium industry could be heading for a lithium shortage by 2025, thanks to increasing demand for electric vehicles (EVs), according to Fitch Solutions’ research unit BMI. Here are three lithium stocks to keep an eye on.
- Albemarle is not giving up in its pursuit of Australian miner Liontown Resources.
- Rio Tinto has announced plans for a battery manufacturing research lab in Australia.
- Atlantic Lithium is hopeful of receiving a mining lease for its Ewoyaa project in Ghana.
The M&A Hunting Stock
Albemarle [ALB] hinted on its second-quarter (Q2) 2023 earnings call last month that it intends to go hunting for companies to buy, with a view to locking in its post-2030 supply and avoid being impacted by future supply squeezes. “We are pretty good until the end of the decade. But given the time it takes to develop resources, we need to be identifying and bringing and owning additional resources,” said Chairman, President and CEO Kent Masters.
The battery-chemical giant and world’s top lithium producer had its A$5.2bn offer for Liontown Resources [LTR.AX] rejected on the grounds that it undervalued the Australian miner. But Masters isn’t giving up just yet, telling the Australian Financial Review last month: “I would say it’s a standing offering. We’ve not pulled it.”
Net sales were $2.4bn in the three months to the end of June, up 60% year-over-year, while adjusted EBITDA came to $1bn, up 69% year-over-year driven by higher lithium prices. The full-year revenue outlook has been raised from a range of between $9.8bn and $11.5bn to between $10.4bn and $11.5bn. Albemarle is expecting prices to remain elevated for the rest of 2023.
The EV Race Stock
Rio Tinto’s [RIO.L] main assets may be in iron ore and copper mining, but the Anglo-Australian producer is also making moves in pursuit of ‘white gold’.
Speaking at a mining conference in Brisbane in June, Rio Tinto Chief Executive of Minerals Sinead Kaufman announced plans for a manufacturing research lab to help accelerate Rio’s EV battery push, by testing how certain minerals perform in real-world applications, Reuters reported.
In March last year, Rio Tinto bought the Rincon lithium project in Argentina for $825m — the site is capable of producing EV battery-grade lithium carbonate. The purchase should help the company to achieve double-digit growth in lithium demand for the rest of the decade, over a period when the broader industry is expected to wrestle with a supply squeeze. There have previously been plans for a lithium project in western Serbia, but the proposed mine was scrapped by the Serbian government following pressure from environmental activists.
The Africa-Focused Stock
Africa could become a region of increasing focus as countries and industries look to reduce their reliance on China.
Australian exploration and development miner Atlantic Lithium’s [ALL.L] flagship project, Ewoyaa, is in Ghana.
In early August, the company issued a regulatory release stating it is confident it will receive the necessary lease for the project, following Ghanaian government approval of a green mining policy to boost its lithium industry. This policy will bring “changes to the mining royalty rate and the state's carried interest in minerals projects”, wrote the company, confirming that it is “in regular discussion” with Ghana’s minerals commission.
The Ewoyaa project is expected to cost an estimated $185m, of which Piedmont Lithium [PLL.AX] will contribute approximately $128m; some $70m of that will go towards construction costs, according to Atlantic’s definitive feasibility study. Piedmont has exercised an option to acquire a 22.5% interest in the project, as part of a staged investment agreement that could bring it to an eventual 50% equity interest in Atlantic’s Ghanaian lithium portfolio.
The Sprott Lithium Miners ETF
Another Way to Invest in Lithium
ETFs, or exchange-traded funds, offer an economical and diversified way to invest in a variety of stocks within a particular theme.
The Global X Lithium ETF [LIT] has Albemarle as its top holding as of 5 September. As of 31 August, the materials sector accounts for 40.3% of the portfolio, while consumer discretionary has been allocated 27.1%. Industrials and information technology have weightings of 16.4% and 16.2% respectively. The fund is down 11.3% in the past year and down 4.2% in the past six months.
The Sprott Lithium Miners ETF [LITP] is the only US-listed pure-play ETF for the mining of the metal. Albemarle is the second-biggest holding in the fund, which also holds Atlantic Lithium as of 5 September. The fund is down 21.2% since it launched at the beginning of February, and down 10.6% in the past six months.