Elon Musk, the CEO of electric vehicle maker Tesla Inc. (ticker: TSLA), has dubbed lithium batteries the “new oil.”
For more than a hundred years, oil has been the lifeblood of the transportation economy. But as the world transitions away from fossil fuels in an attempt to keep climate change in check, lithium-powered electric vehicles are replacing internal combustion engines.
Demand for lithium — the soft, silver-white metal crucial for electric vehicle batteries — is expected to be in such high demand that automakers have begun investing directly in lithium mining companies in addition to inking agreements to buy lithium from producers.
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Electric vehicles make up about 65% of total lithium demand, and some analysts expect that to grow to 75% by the end of the decade, says Oerta Trepca, an associate director at Nasdaq.
Nearer-term risks for lithium investors include fluctuations in electric vehicle demand, volatility in lithium prices and geopolitical risks across the supply chain, she says.
But overall, the investing picture is bright. In addition to batteries for electric vehicles, lithium is crucial for the batteries in utility-scale renewable energy projects, making the lightest metal on Earth indispensable to the global energy transition away from oil, natural gas and coal. Also, it’s worth keeping in mind that lithium is used in batteries for personal electronics, so investors will want to keep an eye on the growth prospects for that market, too.
“Investing in the lithium industry continues to garner positive results, and long term there is lots of potential for growth,” Trepca says.
With that in mind, here’s a look at seven lithium stocks to consider:
| Stock | Year-to-date performance as of July 27 |
| Albemarle Corp. (ALB) | -4.7% |
| Mineral Resources Ltd. (MALRY) | -5.4% |
| Livent Corp. (LTHM) | 24.7% |
| Lithium Americas Corp. (LAC) | 0.7% |
| Sigma Lithium Corp. (SGML) | 27.8% |
| Horizons Global Lithium Producers Index ETF (HLIT.TO) | 10% |
| Global X Lithium & Battery Tech ETF (LIT) | 10.3% |
Albemarle Corp. (ALB)
A recent addition to Time magazine’s “100 Most Influential Companies” list, Albemarle is one of the largest producers of lithium in the world. It’s also one of the most vertically integrated, with mining, extraction and purification operations.
Although Albemarle is one of the key companies in the U.S. lithium industry, it’s not a pure play, as it also sells bromine and catalysts.
In May, the company announced a five-year agreement with Ford Motor Co. (F) to supply more than 100,000 metric tons of lithium hydroxide for approximately 3 million electric vehicle batteries.
Albemarle is also in the process of taking full ownership of a lithium hydroxide processing facility in Australia that it jointly owns with Mineral Resources Ltd. (MALRY). Albemarle is planning to expand the facility’s production capacity. The company’s stock is down a bit this year, losing 4.7% as of July 27.
Mineral Resources Ltd. (MALRY)
The deal with Albemarle involves the U.S. company paying Mineral Resources $380 million to $400 million.
Under the agreement, Mineral Resources — which is based in Australia, the world’s largest producer of lithium — will increase its share of the Wodgina lithium mine in Australia to 50% from 40%, with Albemarle owning the rest. The mine is one of the largest known hard-rock lithium deposits in the world and has an estimated mine life or 30 years or more.
Mineral Resources also owns half of the Mt. Marion lithium operation in Western Australia, along with China-based Ganfeng Lithium Group Co. Ltd. (GNENF), one of the largest lithium mining companies in the world. This ownership stake, along with the Australian company’s partnership with Albemarle, offers some risk mitigation. Similar to ALB, Mineral Resources’ stock has fallen so far in 2023, losing 5.4% as of July 27.
Livent Corp. (LTHM)
Livent Corp. produces lithium hydroxide, lithium carbonate and lithium chloride and has a six-year supply agreement with General Motors Co. (GM) to deliver lithium hydroxide starting in 2025.
The company is also in the process of merging with Allkem Ltd. (OROCF), a multinational company with lithium brine operations in Argentina, a hard-rock lithium operation in Australia and a lithium hydroxide conversion facility in Japan.
The combined company, which boasted sales of about $1.9 billion last year and adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of about $1.2 billion, should be able to produce about 250,000 metric tons of lithium carbonate equivalent per year by 2027.
The companies estimate that the combined entity will be able to save $125 million per year on top of a one-time savings of about $200 million because they have assets that are close to each other and can be developed at the same time in Argentina and Canada.
Livent’s stock has performed well this year, gaining 24.7% as of July 27.
[7 Best Mining Stocks for the Energy Transition]
Lithium Americas Corp. (LAC)
This lithium producer is in the process of splitting itself into two publicly traded businesses, with one focusing on projects in Argentina and the other to focus on the U.S.
One of its Argentina projects recently achieved first production. Production gives mining companies cash flow and reduces their risk profile. The U.S.-focused company’s main asset is a project in Nevada that is the largest known lithium resource in the U.S.
Lithium Americas has backing from Ganfeng and GM. The automaker has agreed to invest an additional $330 million in the new U.S.-focused company after the separation. Lithium Americas says it is targeting the final quarter of this year for the completion of the separation.
LAC shares are relatively flat so far in 2023, adding 0.7% as of July 27.
Sigma Lithium Corp. (SGML)
This lithium producer with operations in Brazil announced this month that it made its first shipment, consisting of 15,000 metric tons of battery-grade lithium and 15,000 metric tons of by-products.
The company has started generating revenue from its first phase of production, and it expects to produce about 130,000 metric tons this year as it continues to ramp that first phase up to full-scale production.
After that, the company says it expects to reach full production of the second and third phases next year, making it one of the world’s biggest lithium producers and, according to Alexander Voigt, CEO of Daytradingz.com, “leaving room for further increases in the stock price and a positive EPS in the near future.”
Although the company has been losing money, Voigt expects Sigma Lithium to swing to positive earnings per share next year. And SGML shares are up a whopping 27.8% year to date.
Horizons Global Lithium Producers Index ETF (HLIT.TO)
“As for the risks of investing in lithium stocks, there is no risk of decreasing demand, so only company decisions and project developments would primarily influence the company’s profitability and price-per-share projection,” Voigt says.
One way to hedge against risks is to own multiple companies packaged in an exchange-traded fund, or ETF, under a single ticker symbol, offering diversification between individual companies with their various fundamentals and geographic concentrations.
One such fund is the Horizons Global Lithium Producers Index ETF, which focuses on global companies that mine or produce lithium, lithium compounds or lithium-related components.
The fund’s biggest holding is Pilbara Minerals Ltd. (PILBF), owner of the Pilgangoora lithium project, which it says is one of the largest hard-rock lithium operations in the world.
The fund, traded on the Toronto Stock Exchange, has an expense ratio of 0.85% and an annualized distribution yield of 1.7%.
Global X Lithium & Battery Tech ETF (LIT)
ETFs can also provide diversification across different parts of the lithium supply chain. That can provide cushioning against lithium price volatility. For example, if prices fall, that’s a negative for producers but a positive for companies that buy lithium to make value-added products.
“It’s not only the mining portion of the industry that investors should monitor, but also those plants and factories further down the lifecycle of the metal — refiners that process the metal into the type of lithium that actually goes into batteries,” Trepca says.
In addition to miners, the Global X Lithium & Battery Tech ETF holds refiners and battery producers, “cutting across traditional sector and geographic definitions,” the fund’s website says. Its biggest holding is Albemarle, followed by Rivian Automotive Inc. (RIVN) and Tesla.
The fund has an expense ratio of 0.75%.
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7 Best Lithium Stocks and ETFs to Buy in 2023 originally appeared on usnews.com
Update 07/28/23: This story was previously published at an earlier date and has been updated with new information.
