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Can Atlantic Lithium benefit from sky high lithium prices?

Atlantic Lithium’s share price has experienced a substantial drop this year as the lithium miner races to get its operations up and running in Ghana and raise capital the company listed on the Australian Securities Exchange in September. Lithium prices reached a record high earlier in the year, driven by demand from electric vehicle manufacturers. Atlantic Lithium could benefit if heightened prices prove to be a long-term trend – or if the company moves quickly.

Atlantic Lithium’s [ALL] share price has experienced a substantial drop this year as it races to get its Ghana-based operations live so that it can benefit from sky-high lithium prices.

As of last week’s close of 38.8p, Atlantic Lithium’s London listed stock has fallen 42.94% from the 52-week high of 68p that it recorded on 12 April 2022 and 42.39% since the start of the year. This lithium and battery investment theme has fallen 19.14% this year and 8.91% over the past month, according to our thematic screener. 

Atlantic Lithium lists on the Australian Securities Exchange

Atlantic Lithium is a lithium-focused explorer operating in Western Africa and backed by US-Australian lithium developer Piedmont [ASX:PLL]. Its flagship Ewoyaa Project in Ghana is on track to become the country’s first lithium mine.

The company’s stock began trading on the Australian Securities Exchange (ASX) under the ticker A11 at the end of September. The initial public offer consisted of 22,850,000 shares at a price of A$0.58 per share. The company is also listed on London’s AIM index under the ticker ALL.

According to a press release accompanying the announcement, Atlantic Lithium’s motivations behind the listing are to raise the profile of its projects in a “market where lithium exploration companies have in recent times attracted significant investor interest”. Other reasons given for the listing include extending Atlantic Lithium’s shareholder base and allowing Australian investors to reposition UK investments closer to home.

Ewoyaa Project could deliver $5bn in revenue

Atlantic Lithium plans to produce lithium spodumene pegmatite at its Ewoyaa Project in Ghana within one year. In September, Atlantic Lithium released results of a pre-feasibility study for the project, concluding that the mine has an estimated value of $1.33bn, with free cash flow of $2bn. The internal rate of return is expected to be 224% in less than five months, with the company anticipating revenues in excess of $4.84bn over the mine’s 12.5 year life span.

In August, Atlantic Lithium reported positive drilling results from the project, which interim chief executive Lennard Kolff described as demonstrating the “potential for resource growth outside of the current resource and for an extended mine life”. Atlantic Lithium expects to start production at the mine in the second half of 2024.

While analyst coverage for Atlantic Lithium’s share price is light, Proactive Investors reported that Liberum Capital is reviewing their 149p price target for the stock following the pre-feasibility study.

Speed is of the essence if the company’s Ewoyaa lithium project is to benefit from rising lithium prices. Growing demand for electric cars raised spot prices of lithium carbonate to a record high of $79,550 per metric ton in March of this year. At the start of 2020 it had been trading at $7,500.

"Now is the time to capitalise on higher prices in the market, because it won't last," Kolff told Reuters. The CEO suggested that prices will decline as more lithium mines come online.

A surge in demand for electric vehicles following the global Covid-19 lockdowns led to manufacturers rushing to secure lithium for use in electric batteries. Supply shortages could keep prices high, especially as it can take years for a mine to become operational.  Government mandates are driving further demand for lithium. In the US, the Biden administration wants to require that zero-emission vehicles make up half of all new vehicles sold in the country by 2030. In the UK, the sale of new pure petrol or diesel car and van sales will be banned by the same year. Providing Atlantic Lithium makes a timely start and lithium prices remain strong, it could benefit from this shift to electric vehicles.

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