There are several factors that have affected the Atlantic Lithium share price over the past year. This includes the rising price of lithium, as well as progress at the company’s Ewoyaa Project in West Africa. As the company is still pre-revenue, this has also fed into the recent volatility.
The Atlantic Lithium [ALL.L] share price has had a turbulent year so far, with its share price reaching a 52-week high of 68p in April before dropping back to 40.4p at the close on 17 June. However, the stock is up 48.2% in 2022 to date and up 127.8% over the past 12 months. The recent selloff has, therefore, likely been driven by general bearish market sentiment, alongside the fact that Atlantic Lithium remains pre-revenue.
Despite broader headwinds, the success of Atlantic Lithium’s flagship project in Ewoyaa, Ghana, has helped to boost investor sentiment. While the long-term trajectory remains unclear, the Australia-based company has also benefitted from the recent surge in lithium prices amid increasing demand for the metal, which is used for electric vehicle (EV) batteries and consumer electronics. The price of the precious metal is up 436.5% in the last 12 months (through 17 June). Even if there is a price correction, the rapid expansion of the EV market alone is likely to support the industry’s continued growth.
Ewoyaa Project’s cost savings
Many investors have bought Atlantic Lithium due to its flagship project in Ewoyaa, which aims to be West Africa’s first lithium mine. There are several reasons why this has led to bullish sentiments.
First, Ewoyaa is already fully funded to production, meaning that there is unlikely to be an imminent equity raise. As issuing more shares often leads to the company’s share price declining, this has been a positive factor for the Atlantic Lithium share price.
Last week, the company also announced a very positive update from the mine, stating that the sources of lithium are much coarser than previously expected. Atlantic Lithium’s interim CEO, Lennard Kolff, stated that “this provides potential for lower operating costs” at the mine.
Despite this positive news, the Atlantic Lithium share price has still sunk 19.5% over the past eight consecutive days through to 17 June. Although there is no overt reason for this fall, the wider decline in UK stocks could have contributed to the fall. Also, the fact that Atlantic Lithium’s pre-feasibility study is not expected until the third quarter of the year, down from previous targets of the second quarter, is likely to have been a factor.
The soaring price of lithium
Another reason for the 48.2% year-to-date rise in the Atlantic Lithium share price is the rising price of the metal itself. According to figures from Benchmark Mineral Intelligence (BMI), the price of lithium has risen 392.3% year-over-year and 119% year-to-date as of 17 June.
Many believe that the price of lithium will continue to go up due to increasing demand for EVs, which require lithium battery cells). For example, the consulting firm McKinsey predicts that the electric vehicle battery market will grow to at least $360bn by 2030, with annual growth of around 20%.
However, there are some fears that the recent rise is entirely unsustainable. A research note released by Goldman Sachs analysts on 29 May stated that they believe the battery metals market has peaked from its steep growth trajectory seen during the pandemic, and that prices are likely to undergo a “sharp correction”. However, the analysts acknowledge that the industry’s long-term prospects are strong, particularly due to the rise of EVs.
Where next for the Atlantic Lithium stock?
The future price of lithium seems very uncertain, and this is likely to cause significant turbulence for the Atlantic Lithium share price. However, there is also the potential for the Ewoyaa project to produce a significant amount of lithium, which would coincide with large revenues and profits.
Analysts polled by Market Screener expect the Atlantic Lithium share price to grow in the near term. Canaccord Genuity has placed a speculative ‘buy’ rating and a 70p price target for the firm, implying an upside of 73.3% from its 17 June closing price. This high price target has been based on the expectation of a positive project feasibility study.