- Lithium has become crucial to keep our technology-dependent world alive
- Lithium-ion batteries are the key to lightweight, rechargeable power for digital devices such as laptops and phones, as well as batteries for electric vehicles
- The global lithium market size is expected to reach US$18.9 billion by 2030
- It is expected that rising investments in lithium mining and related technologies are projected to remain a significant trend
Lithium – the lightest known metal carries a lot of weight on the stock market
Lithium has become crucial to keep our technology-dependent world alive. Its main use is to manufacture aircraft, and it’s used in certain batteries. Lithium-ion batteries are the key to lightweight, rechargeable power for digital devices such as laptops and phones, as well as batteries for electric vehicles (EVs).
In a move to reduce carbon dioxide (CO2), greenhouse gas emissions, and fossil fuel consumption, many countries around the world have banded together on the Paris Agreement to mitigate the impacts of climate change. This has put even greater demand on companies involved in renewable energy, especially those in lithium, building better and stronger batteries for EVs.
It is also used in heat-resistant glass and ceramics, lubricants and additives for iron, steel, and aluminum production.
While China takes up the bulk of global lithium production, Argentina and Chile have greatly increased their operations, according to the U.S. Geological Survey.
Lithium carbonate vs. lithium hydroxide:
Lithium companies produce two types of lithium: lithium carbonate and lithium hydroxide.
Aside from chemical differences, these two types differ in how they’re produced, as well as how long they last.
Lithium carbonate is extracted from underground brine pools and man-made lakes. While lithium hydroxide is a byproduct of lithium carbonate, it’s also found in colourful rock beds known as “spodumene ore.”
The advantage of lithium hydroxide is that it can often outlast lithium carbonate, which makes it more valuable for EV manufacturers such as Tesla Inc. (NDAQ:TSLA, Forum), who want their batteries to have the longest possible lifespan.
Lithium is attractive for industrial applications because it has the highest electrochemical potential among all the metals.
Lithium stocks to invest:
Lithium stocks are publicly traded companies that mine for the metal or use it to produce things like lithium-ion batteries. Unlike metals such as gold, silver, or copper, investors cannot invest in lithium as a commodity, but instead must put money toward lithium stocks to gain exposure.
Because most of the world’s largest reserves of lithium are in China, Chile, Argentina and Australia, many companies around the world keep their operations in one of those four countries.
Top stocks for mining:
Albemarle Corp. (NYSE:ALB, Forum) (Market cap: US$26.90 billion) – One of the world’s largest suppliers of lithium, its two largest clients are Panasonic Corp. (OTC:PCRFY) and Samsung (PINL:SSNLF), which rely on its product to manufacture lithium ion batteries for consumer electronics. ALB stock has risen 5.7 per cent year to date. Market close: C$304.15 per share.
Ganfeng Lithium Group Co. Ltd. (OTC:GNENF, Forum) (Market cap: US$114.95 billion) – China’s largest producer of lithium and the third-largest producer in the world. GNENF stock has fallen 11 per cent year to date. Market close: C$8.63 per share.
Sociedad Química y Minera de Chile S.A. (NYSE:SQM, Forum) (Market cap: US:$16.3 trillion) – A Chilean commodities producer with a significant output of lithium. SQM stock has gone down 13 per cent year to date. Market close: C$99.56 per share.
Lithium Americas Corp. (TSX:LAC, Forum) (Market cap: US$3.26 billion) – A Canadian company with plans to advance lithium operations in Nevada and Argentina. LAC stock is up 4.9 per cent year to date. Market close: C$26.74 per share.
Alternative lithium stocks:
The top names in this space offer a picture of where the industry is, but hardly serves as an entry-point for new investors. Here are some smaller-cap stocks found on Canadian exchanges.
Rock Tech Lithium Inc. (TSXV:RCK , Forum) (Market cap: C$196 million) is focused on developing and optimizing battery-grade lithium hydroxide monohydrate through the construction and operation of multiple lithium hydroxide manufacturing plants in Europe and North America. The company operates the Converter Project and Georgia Lake Project. RCK stock is down 1.9 per cent year to date. Market close: C$2.01 per share.
ACME Lithium Inc. (CSE:ACME, Forum) (Market cap: C$18 million) this company has the option to acquire 100 per cent interest in projects in Nevada, Manitoba and northern Saskatchewan. ACME shares are 12.1 per cent lower year to date. Market close: C$0.29 per share.
North Arrow Minerals Inc. (TSXV:NAR, Forum) (Market cap: C$10 million) An exploration company focused on the identification and evaluation of lithium and diamond opportunities in Canada, North Arrow recently acquired a total interest in the Lac de Gras lithium property, Northwest Territories. NAR shares have grown 71 per cent year to date. Market close: C$0.07 per share.
While investing in specific stocks can expose traders to risk based on a company’s performance, exchange traded funds (ETFs) offer broad exposure and diversification with opportunities to engage with lithium-based stocks:
- Global X Lithium & Battery ETF – This product lineup features more than 60 ETF strategies. Market close: C$87.56 per share.
- Amplify Lithium & Battery Technology ETF – Seeks to provide exposure to global companies deriving material revenue associated with the development, production and use of lithium battery technology. Market close: C$17.56 per share.
- Horizons Global Lithium Producers Index ETF – Offers one of the largest suites of Canadian ETFs with more than C$20.7 billion of assets under management and 104 ETFs listed on major Canadian stock exchanges. Market close: C$38.39 per share.
A good first step to investing is looking through many of the top brokers that specialize in ETFs and offer lithium-based stocks:
- JPMorgan Chase & Co. (NYSE:JPM, Forum) (Market cap: US$428.4 billion) JPM is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management. Market close: C$191.39 per share.
- TD Direct Investing (TSX:TD, Forum) (Market cap: C$149.5 billion) TD offers a range of products and account types to suit the needs and goals of its clients, as well as an educational tool to help novices understand the investing game. Market close: C$81.44 per share.
- Public Holdings Inc. Public is (ironically) a private company with an investing platform that has more than 55,000 businesses from a variety of different industries and more than 1.1 million consumer members.
Market growth:
According to Research and Markets, the global lithium market size is expected to reach US$18.9 billion by 2030. The market is expected to expand at a compound annual growth rate (CAGR) of 12 per cent by 2030.
It is expected that rising investments in lithium mining and related technologies are projected to remain a significant trend. Lithium mining is experiencing rapid growth as its demand is accelerating, owing to its application in batteries.
Challenges:
There is always the fear that lithium could become scarce as demand increases. Because lithium is found in dry places that require thousands of litres of water for its mining, companies are planning ways around how to find alternative methods of extraction, considering the rising demand for elements, and increasing usage of water required.
For example, in February 2020, Bill Gates’ team provided US$20 million in funding to Lilac Solutions, a California-based lithium mining technology firm.
Also, China currently controls around 60 per cent of the world’s lithium-ion battery supply chain, and it has been steadily increasing that stake in recent years. Meanwhile, North America accounts for just 2 per cent of global lithium production.
That presents North America with a significant industrial risk. Now that lithium has been declared as critical to America’s energy needs, its federal government has been rallying around “home-grown” lithium developers in the form of grants to support production.
Investment corner:
A valuable commodity with uses in everything from medications to batteries, lithium is a key ingredient to the next generation of lightweight, rechargeable batteries that power everything from laptops, to phones to EVs.
New stories in the lithium sector are making headlines daily. To keep up with the latest developments, visit Stockhouse’s Battery Metals trending news page.
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