4 Lithium Stocks To Invest In And Try To Profit From Electric Car Battery Boom
The only thing standing between Tesla and global domination is its ability to get its hands on lithium, and that’s good news for producers of the lightest metal, more commonly known for its use in mood-stabilizing medicines than in electric cars.
Tesla CEO Elon Musk promised to increase his company’s capacity for building its own batteries from about 500,000 electric vehicles in 2020 to enough for 30 million by 2030, Barrons reported.
To do that, he’ll need 10 times more lithium than the world mines right now. The current world output of 400,000 tons of lithium a year is enough to power 2 million-to-3-million electric vehicles, but just a third of that goes to EVs. That 400,000 tons doesn’t take into account other electric vehicle makers.
Here are four lithium stocks to invest in and try to profit from the electric car battery boom.
Piedmont Lithium stocks (PPL)
Tesla signed a sales agreement with Australia-based Piedmont Lithium (PLL) in September 2020 to develop a lithium project in North Carolina (one of the world’s hottest regions for lithium exploration, according to Nasdaq.com). Piedmont’s mine isn’t operational yet and it hasn’t generated revenue but its stock more than doubled after news broke of the sales agreement. PPL gained 245 percent in 2020. The deal guarantees that Tesla will buy a third of the startup’s production for up to 10 years. Piedmont said it expects to deliver product to Tesla by 2022 or 2023.
Piedmont is fast-tracking the mine’s development to accommodate the Tesla deal. The company said it will supply spodumene concentrate, a lithium raw material, to Tesla equal to about a third of its planned supply for the initial five years, Bloomberg reported.
Livent mines lithium primarily in Argentina. When LTHM stock went public in October 2018, initial results were unfavorable. Shares only recently exceeded the IPO price to trade higher than $16.50, Investor Place reported. However, Barrons reported that earnings per share are expected to grow from six cents in 2020 to 34 cents in 2023—a 78-percent average annual growth rate. The stock recently traded at about $9 — 28 times the 2023 earnings figure. The stock is more expensive than its peers, but has more to gain from a rising tide in the lithium industry, according to Barrons. “It’s tempting to pick the cheapest stock, but if lithium prices start to run, Livent looks like the best bet.”
Sociedad Quimica y Minera (SQM)
Chile has the world’s largest lithium reserves and Sociedad Quimica y Minera, located in the Atacama Desert, is the world’s top lithium producer. The company has a capacity for 70 kilotons of lithium carbonate and plans to expand to 150 kilotons, according to the company’s 2019 annual report. A kiloton is a weight or capacity equal to 1,000 metric tons.
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“What’s truly compelling about SQM stock is the general stability of the underlying company’s host nation,” Investor Place reported. “Historically, relations between the U.S. and Chile are favorable. While this was put to the test under the Trump administration, the U.S. still represents a critical trading partner to Chile.”
As many countries shun China and look for energy sources elsewhere, Australia-based Orocobre suddenly has enhanced appeal, according to Investor Place.
Here’s some of what the company has going for it. It built “the first large-scale, de novo brine based lithium project in over 20 years” in Argentina, in an area industry analysts describe as the “lithium triangle.”
“That gives OROCF stock some street cred to help assuage concerns of viability.” It also partnered with Toyota Tsusho to build a lithium hydroxide plant in Japan. “As energy diversification increases internationally, these projects represent a springboard for future revenue opportunities,” according to Investor Place.