LONDON, October 4, 2017 /PRNewswire/ --
Lithium prices have skyrocketed, growing by double-digits every year since 2014, and the only real question right now is, how are we going to produce enough of it.
Prices are being driven by hyper-growth in the electric vehicle (EV) industry, and it's only just getting started. Thank Tesla, of course, which brought EVs into the mainstream and then flipped the switch on its first battery gigafactory in January. But Tesla certainly isn't alone: It accounts for only 30 percent of all EV sales in the U.S., and everyone needs to secure more lithium supply for batteries. In focus today includes: Albemarle Corporation (NYSE:ALB), Sociedad Química y Minera de Chile S.A. (NYSE:SQM), FMC Corporation (NYSE:FMC), Global X Lithium & Battery Tech ETF (NYSE:LIT), Tesla, Inc. (NASDAQ:TSLA)
The EV industry alone uses up almost 40 percent of the world's lithium supply for batteries, and when you add massive energy storage solutions, unbridled consumer electronics growth and the emergence of more battery gigafactories-lithium supply will indeed be fantastically tight.
By 2025, the battery market alone will be twice as big as today's entire lithium market-and the growth will only continue.
Today we're looking at 5 stocks that are going to be bringing us the most lithium and at the lowest cost.
#1 Albemarle (NYSE:ALB)
If you think the lithium stock party is over, think again. This 14-billion market cap company still has a lot more partying to do.
This major producer of chemicals is the world's largest supplier of lithium, and has been since early 2015 when it acquired Rockwood Holdings. Right now, ALB has about 35 percent of the global lithium market share.
Albemarle stock is up over 61 percent this past year, and nearly 24 percent over the past three months. Right now it's trading at almost $130 per share.
And it's definitely not smoke and mirrors. Real results have been a huge boost, with 31 percent year-on-year revenue growth in its segment for lithium and advanced-materials in Q1 2017.
Major catalysts include an up-coming doubling of lithium carbonate production capacity thanks to a recent regulatory approval to expand Greenbushes in Australia, which will begin in the Q2 2019. And there will be more growth before then, with capital expenditures of up to $400 million. Lithium is the key focus right now for Albemarle.
The company has beaten analyst estimates for four quarters running, with a price-to-earnings (P/E) ratio of 25.42-way above the industry average.
With the global battery market set to hit $120 billion in less than two years, lithium is much more of a tech play than a mining play.
It was tech that launched the shale revolution, and it will be tech that gets us ahead in lithium. That's why we're looking at a little-known company called International Battery Metals: It's signed an LOI with North American Lithium (NAL) to buy the new, advanced technology to get lithium out of brine in 24 hours instead of 24 months.
IBAT's buying NAL's proprietary technology that hits out at the main problem we have with lithium: It takes too long to produce.
Where traditional solar evaporation technology takes up to 24 months to extract lithium from the brine, IBAT's incoming CEO says the tech that he has invented can do it in 24 hours.
Lithium is currently produced from brine sources and spodumene mines, but it's hard to get to. Lithium production from spodumene is typically significantly more expensive to produce due to high chemical consumption and waste disposal. Solar evaporation processes from brine in Chile and Argentina are large producers of lithium. But these processes are cumbersome because they entail pumping the salt-rich waters into a series of evaporation ponds to extract all other elements, leaving a number of salt fields that must be harvested. Some is sold and the rest is stacked in the desert.
IBAT's technology is different because it's highly selective of lithium over all other ions in the salt solution. This means that the process removes lithium chloride and leaves the other salts in the solution to be pumped back into the ground. So, no toxic tailing ponds or salt piles, giving this tech the smallest possible environmental footprint.
IBAT's technology removes evaporation ponds from the equation. As inventor-CEO John Burba puts it: "Our tech has such a high specificity for lithium that it can directly take the lithium out."
And Burba knows what he's talking about: IBAT's new technology is actually based on a tech that John Burba co-invented and sold in the 1990s when he was a leading technology figure at giant FMC. Now he's made major advancements, and just in time for the lithium demand onslaught.
Before Burba came along, everyone thought that lithium could be produced from only a limited number of brines.
Entering the lithium space just this year, it's hit the ground running. In late July, IBAT signed an option agreement to purchase 37,500 acres in the Woodbury Carper Lithium Resource Project in Illinois. This is a shallow-drilling lithium resource development opportunity in the U.S. heartland, and it's on easy-to-permit and easy-to-drill land. It's already got several existing wells capable of producing large volumes of lithium-rich brine, and a salt-water disposal well to get rid of brines after extraction.
The lithium game isn't about exploration, it's about innovation-and IBAT's proprietary technology was invented by the same game-changing inventor that came up with a similar tech for FMC Corp. (NYSE:FMC), one of the world's four top lithium producers.
#3 Sociedad Quimica y Minera S.A. (NYSE: SQM)
Chilean giant SQM has five business segments-one of which is lithium, and it's expanding production. This is an emerging market pick but it's had a stellar performance record. Total returns have jumped 89 percent since the first of July.
This company has access to vast reserves, right in the heart of the South American 'Lithium Triangle', which spans Chile, Bolivia and Argentina. It's also one of the biggest lithium producers in the world-and it knows this metal is its future.
SQM is full-on with its lithium expansion, currently ramping up its JV project with Lithium Americas in Argentina. Now it's planning to increase its lithium capacity in Chile to 63,000 tonnes per year-up from 48,000 tonnes per year currently.
The major catalyst at the moment is the rumor of a Chinese buyout, so lately this stock has been taking an upward ride on this talk alone.
#4 FMC Corp. (NYSE: FMC)
The primary driver for FMC has been agricultural products, but as one of the world's four main lithium producers, a segment that is now the biggest growth sector for FMC, it is hedging its bets on major expansion here. The lithium segment could also end up being spun-off into its own publicly owned company. That would be a first: the first pure-play lithium stock (of any standing).
Last spring, the company said it would triple its production of lithium hydroxide by 2019, and production growth this year has been promising.
FMC shares are up almost 84 percent over the past year, and 17 percent over the past three months. It's currently trading with a market cap of $11.5 billion.
Earnings were released in August, posting a profit of $75 million ($0.56 per share) in Q2 2017. That's up $10 million from a year ago. Specifically, lithium unit revenues were up 17 percent, to $74 million-that's 47 percent growth year over year.
#5 Global X Lithium & Battery Tech ETF (NYSEARCA: LIT)
For investors who want broad exposure, LIT is it. This ETF with a lithium and battery theme-the full lithium cycle--is being accepted by the market with a fair amount of enthusiasm, and is gaining momentum as we speak.
So far in 2017, LIT has rounded up over $263 million in capital, and it's been one of the best performing ETFs this year.
This fund has 28 stocks in its basket, and the strongest focus is on FMC and Albemarle, which together make up nearly 42 percent of the ETF's assets.
It's an attractive basket right now, and gives investors direct exposure to lithium prices, but also adds nice diversification along the entire chain.
Honorable Mentions in the lithium/EV space:
Tesla Motors Inc. (NASDAQ:TSLA): No large cap company has dazzled over the past couple of years like Tesla, which overtook giant GM this year in market cap-a major, unexpected feat. Tesla is the future, and its stock price agrees. Tesla's electric cars will eventually be more profitable than traditional cars, and easier to produce. Costs will keep coming down, especially now that Tesla's has launched its battery gigafactory in Nevada, and when it gets battery (and lithium) prices down.
Ford Motors: Ford's stock has been taking a beating, but the auto giant is now demonstrated that it's willing to fight for new market share in the EV industry.
Orocobre: This company has had some serious problems and its stocks have seen major extremes. Right now it's really low and has earned the title of one of the most-shorted stocks in this space because of production delays and even a gross spreadsheet error. But the company still must be viewed as the first brine concentrate lithium project in 20 years, and a new catalyst may end up being the ability to self-fund the expansion of its Olaroz lithium hydroxide plant in Japan.
eCobalt Solutions: The cobalt space is just as important as the lithium space in this energy revolution, and eCobalt is ethically sourced (not mining in the Democratic Republic of Congo), and its primary asset is in prime territory in Idaho. eCobalt is expecting feasibility study results in Q2. This is shaping up to be one of the most exciting belts in the US.
Fortune Minerals: Operating in Canada's Northwest Territories, Fortune is eyeing status as a major Canadian producer of battery-grade cobalt chemicals--but it's also got copper and gold bismuth upside. And it's getting a boost from the government in terms of mining infrastructure.
Canada's Ivanhoe Mines (TSX: IVN): IVN has recently said it plans to develop the DRC-based Kamoa-Kakula deposit, thought to be one of the biggest high-grade copper discoveries in the world. Cobalt will be a lucrative by-product.
By. Meredith Jenkins
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This news release contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this release include that IBAT will complete its announced transaction with North American Lithium and acquire NAL's technology and IP; the Lithium extraction process will be cost effective and can work much more quickly that other extraction technologies; that the process can be commercialized for large scale production; that the NAL team which knows the NAL technology will join IBAT; that the NAL technology can be licensed worldwide. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that the Company and NAL may not agree on the final agreement terms, aspects or all of the process development may not be successful, the process may not be cost effective, the Company may not raise sufficient funds to carry out its plans, changing costs for mining and processing; increased capital costs; the timing and content of upcoming work programs; geological interpretations and technological results based on current data that may change with more detailed information or testing; potential process methods and mineral recoveries assumption based on limited test work and by comparison to what are considered analogous deposits that with further test work may not be comparable; competitors may offer better technology than NAL's lithium extraction technology; the availability of labour, equipment and markets for the products produced; and despite the current expected viability of the project, that the minerals cannot be economically mined with the NAL technology, or that the required permits to build and operate the envisaged mines cannot be obtained. The forward-looking information contained herein is given as of the date hereof and the Company assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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