“Lituation” is another way to describe a LIT situation 🕺💃🔥 in the global economy, as the global hunger for renewables continues to rise. Lithium, a key component of batteries, is at the core of the demand since there is a requirement to make energy storage a reality in many industries.
Globally, the demand for lithium is expected to rise as more battery producers seek more suppliers, with the market predicted to double by 2030. This is fuelled by the rise in demand for electric vehicles (EV) and other lithium-requiring tech. We look into different investment opportunities that may expose one to the lithium market, as commercialisation spells gains for investors 💰 while contributing to the 13th Sustainable Development Goal, which focuses on climate action. ✊
Lithium America Corp. (LAC)
Looking for energy storage or wealth storage for your investments 🤔? Lithium America Corp. is a Lithium exploration company. The company is focused on expanding in some of the key regions in the lithium market, the US and Argentina. It currently consists of four projects in the regions, one in the US and three in Argentina.
The Caucharí-Olaroz project is one of the projects based in Argentina, where the company is expanding its production to at least 20 000 tonnes per annum (tpa); the construction of the project is 85% complete, with commissioning expected to start by the second half of 2022 (H2 2022).
The second phase expansion of the US-based Thacker Pass project shows a potential of 80 000 tpa. The feasibility study results are expected to be released in H2 2022.
Argentina's lithium supply represented 22% of the world's identified lithium in 2020. While the US only supplies 2% of the world's lithium, demand in the jurisdiction has increased as the economy prepares to go green. The US economy is currently the biggest economy in the world, with a gross domestic product (GDP) of $19 trillion.
Rallying behind the volatile lithium prices, the Lithium America Corp. stock surged by 6% on Thursday, 19 April 2022.
Despite the $0.10 loss per share for the company's 2021 fourth quarter (Q4 FY21), there was a rise in institutional investors during the prior year, resulting in a 15% institutional holding in the company. Something cooking? 🧐
The company closed its 2021 financial year (FY21) with a balance of $511 million from $148 million in the prior comparative period (December 2020). Total assets for the year were valued at $817.3 million vs $326.7 million PCP. European Lithium raised $377 million through a public offering during the period. (But more on that later.)
From a perspective of playing both sides, Lithium America’s footprints in one of the largest suppliers and the biggest economy may benefit the company as demand rises.
In search for funding, after the public offering, the company further submitted an application to the US Department of Energy requesting funding for its Thacker Pass project.
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European Lithium Limited (EUR)
European Lithium is a lithium exploration company that has been positioning itself strongly within the lithium market. Despite market volatility, the stock has been hovering between $0.15 and $0.11 as the company continues to explore new opportunities to benefit from the lithium demand and create better value for investors in the short to long term.
Aiming to be one of the leading European lithium suppliers, the company recently reported a net present value (NPV) of AU$862 million for its Wolfberg project. The project is expected to allow the company to explore in Austria.
Tony Sage, European Lithium chairman, said: "Calculation of a positive interim NPV provides confidence in the future commercialisation of the Wolfsberg project that comes during a buoyant market for lithium and increased urgency for decisive action to accelerate the green energy transition, specifically in Europe."
Despite the losses which occurred during the period, European Lithium cash and equivalent balance for the FY21 was closed at $9.3 million, compared to $410 056 the previous period.
In general, exploration mining companies tend to behave differently from the core commodity focus, which is influenced by the deals, discoveries and projects that the company may ink and secure. Associated with volatility, explorers usually trade at a low price as these companies at times have little to no operations or cash flow. News not widely covered that may surface over time could trigger high volatility, depending on its impact on the company’s growth, future outlook or current projects – especially when more funds are injected.
Taking the exploration journey with the company 🤔? The company’s capital expenditure was $508.32 million, of which 60% was debt and 40% equity. This comes after the company raised an additional AU$30 million through a private placement for the Wolfberg project. The project is expected to play a significant role in lithium supply in the EV evolution in the European region, where vehicles on the road are expected to reach 40 million by 2023.
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Global X Lithium & Battery Tech ETF (LIT)
Global X Lithium & Battery Tech ETF Is an exchange-traded fund (ETF) that's themed for the occasion – beyond just one stock size. The fund exposes investors to the lithium market through 41 stocks, while seeking more emerging opportunities within the space.
Some of the top holding within the fund include Albemarle Corp, Tesla, Quimica Y-SP, TDK Corp, Samsung SDI Co Ltd, Contemporary A-A, Panasonic Holdings Corp, Ganfeng Lithium Co, and Yunnan Energy. The fund aims to align with the investment results and performance yield of the Solactive Global Lithium Index.
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Considering the high demand for lithium, this may bring about volatility.
Another theory that may come into play in the medium to long term is 'high prices being the cure of high prices', which as a result, may pull demand down due to high costs before prices hit what I'd call the market access price, where prices reach a point of consumer access that may trigger support for demand to rise again.
And while the abovementioned may sound theoretically correct, markets have reacted differently from theory during this unprecedented period in some cases, recently raising concerns of stagflation and recessions.
Another factor to consider may be consumer behaviour and how central banks are controlling the access to more money for consumers.
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Sources – EasyResearch, Consultancy, Lithium America Corp, European Lithium Limited, The Business Journals, Global X Lithium & Battery Tech ETF, World Data, Global X.
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