By Tayo Olayinka
When it comes to investing, plenty of options are always available. After all, investors have scores of investing options. However, one cannot just invest in the whims of others just because they seem too good to ignore. One must consider investment on return, time horizon and risk appetite, among other factors.
However, nothing is more important than picking the right investment choice. If you are also considering investing but don’t know which commodity to invest in, this guide is for you. As anyone can tell now, lithium is at the forefront of the green energy transition, primarily driven by the demand for electric vehicles (EVs) and renewable energy storage solutions.
As global industries shift towards decarbonization, the need for lithium-ion batteries is expected to rise significantly. This creates an opportunity if you want to diversify for long-term growth. So, we will discuss how to invest in lithium, the best lithium investments, and where you can start.
Canada’s lithium market
Canada holds significant lithium deposits, especially in hard rock spodumene and brine-based resources. Some provinces such as Ontario, Quebec and Alberta are home to many lithium exploration projects, with 409 active projects, of which 106 are advanced. These projects include significant operations by companies such as Beyond Lithium (CSE:BY), which is focused on unlocking Canada’s lithium potential through extensive exploration and advanced technology.
The Canadian government has been actively supporting the lithium mining industry, contributing millions to projects such as E3 Lithium’s (TSXV:ETL) $87 million facility, which will produce battery-grade lithium in Alberta. This aligns with Canada’s broader critical minerals strategy and its push towards a low-carbon economy, focusing on electric vehicle battery production.
These lithium deposits and extraction projects show a huge potential for lithium-related companies. Now, let’s discuss some investment options if you don’t know how to invest in lithium.
Lithium-focused ETFs
Several lithium ETFs can give you exposure to the Canadian lithium market. One of the most well-known is the Global X Lithium & Battery Tech ETF (ARCA:LIT). This fund provides global exposure to lithium mining and battery technology companies, with holdings such as Albemarle Corp. (NYSE:ALB), Pilbara Minerals (OTCPK:PILBF), and Sigma Lithium (TSXV:SGML) with headquarters in Vancouver.
The second option is the Global X Lithium Producers Index ETF (TSX:HLIT), which focuses on companies primarily involved in lithium production. The third option you can consider is Amplify Lithium & Battery Technology ETF (NYSE:BATT).
Top lithium stocks in Canada
As an investor, you can also invest in Canadian-listed lithium stocks on the Toronto Stock Exchange (TSX) or through venture exchanges. To invest in lithium stocks, you should research company financials, lithium project locations, and the potential growth of their reserves. Similarly, you can track lithium prices and industry trends to spot opportunities.
Some of the Canadian-listed lithium stocks to invest in are Frontier Lithium (TSXV:FL) and Standard Lithium (TSXV:SLI). Frontier Lithium is advancing its PAK Lithium Project in Ontario, which boasts one of North America’s highest-grade lithium deposits. Standard Lithium focuses on extracting lithium from brine operations in Arkansas, but its Canadian listing provides exposure to Canadian investors.
Top lithium companies to watch
Canada is home to several lithium-focused companies with significant domestic and international operations. These companies are crucial players in the growing demand for lithium, driven by the electric vehicle and battery industries. Below are some critical stocks that Canadian investors should consider when exploring lithium investments.
Sigma Lithium Corp.
Sigma Lithium is a Vancouver-based company primarily operating in Brazil. Its flagship Grota do Cirilo project is one of the world’s most significant lithium hard rock projects. With ongoing expansions, Sigma is strategically positioned to supply the lithium-ion battery market, particularly for electric vehicles. The company has faced leadership changes recently, but it continues to grow in Brazil’s emerging lithium sector.
Lithium Americas Corp.
Lithium Americas Corp. (TSX:LAC) is an emerging player with operations in Nevada (Thacker Pass) and Argentina (Cauchari-Olaroz). Its Thacker Pass project is the largest known lithium resource in the United States, while its Argentine project is nearing production. Lithium Americas is well-positioned to benefit from the North American EV supply chain while maintaining a significant presence in South America.
Standard Lithium Ltd.
Standard Lithium Ltd. stands out by developing innovative lithium extraction technologies. Its flagship project in Arkansas focuses on extracting lithium from brine, offering an environmentally friendly approach. This technology sets Standard Lithium apart in the U.S. market, with potential long-term scalability and applications in lithium-rich regions.
Direct investment in mining projects
A third option is possible if you want to learn how to invest in lithium. Many mining projects allow for equity participation in lithium mining ventures. Some of the notable mining companies you can consider are Nemaska Lithium, which is advancing its Whabouchi project in Quebec, and Lithium Americas Corp., which is expanding its operations in Nevada and Argentina.
Similarly, royalty and streaming agreements are another investment avenue. In this scenario, you provide capital to mining companies in exchange for a share of future revenue or discounted purchases of lithium. Royal Gold Inc. (NDAQ:RGLD) and Franco-Nevada Corp. (TSX:FNV) are prominent companies offering such agreements, with investments spanning various mining operations, including lithium.
Conclusion
It’s not strange anymore that the world is transitioning rapidly to green energy, and lithium is a precious commodity driving this change. The rise in demand for lithium-ion batteries because of the expansion of electric vehicles and renewable energy storage means many good lithium stocks are available in which to invest.
As an investor, you can invest through ETFs, direct stock investments, or participation in mining projects. Canada itself is a robust lithium sector with deposits and supportive government policies, which means there are prospects for both domestic and international investors.
However, choosing the right investment strategy requires careful consideration of market trends, company performance, and technological advancements. You should also consider risk factors, time horizon, and return on investment. And lastly, don’t put all your eggs in one basket. Diversify when considering the best investment in lithium.
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(Top photo of a processing plant at a lithium mine, where mechanical processing is used to refine lithium spodumene concentrate: Adobe Stock)
