Is Investment In ASX Lithium Stocks A Good Option?
In the wake of lower interest rate-environment in the Australian economy, investors might be interested in looking for alternative investment options that can deliver better returns. One of the fascinating investment option that is catching investors’ attention is lithium stocks.
As the world is moving towards technological advancements and a low-carbon future, the demand for electric vehicles has increased substantially. The rising demand for electric vehicles is further driving the demand for lithium which is one of the key components that is used in the manufacturing of batteries for electric cars. The use of lithium is not limited to electric vehicles; it is being used for a wide range of purposes, including greases and polymers, air treatments, industrial powders, rechargeable batteries, ceramics and glass, and multiple other uses.
As per the Australian government, lithium has a bright future in Australia, with most of the projections delivering increasingly positive trends. Australia is well positioned to meet the growing demand for lithium across the world, with many pegmatite-hosted, hard-rock lithium resources, mainly in Western Australia.
Considering this, let us take a look at few lithium stocks trading on the Australian Stock Exchange below:
Pilbara Minerals Limited
West Perth-headquartered Pilbara Minerals Limited (ASX: PLS) owns 100 per cent interest in Pilgangoora Lithium-Tantalum Project that is located in Western Australia’s resource rich Pilbara region. The project is considered as one of the leading tantalum and lithium projects across the world. The company has been highly successful in advancing the project, taking it from the initial drill hole to production in less than four years.
In August this year, the company informed that it will consider an incremental and optimised pathway to the expansion of Pilgangoora Project to Stage 2, following the completion of its strategic partnering process. As per the company, the incremental approach to Stage 2 expansion provides potential for better alignment and lower upfront CAPEX with customer requirements and current market conditions over time.
The company has recently released its financial report for the year ended 30 June 2019, highlighting an increase in revenue from contracts with customers from $10.2 million in FY18 to $42.8 million in FY19. The total comprehensive loss of the company also increased from $4 million to $6.2 million in FY19. The below table summarises the key financial metrics reported by the company:
PLS closed the trading session flat at $0.345 on 20th September 2019, with about 22.6 million shares in rotation. The stock has delivered negative returns of 52.45 per cent, 42.86 per cent and 23.60 per cent in the last six months, three months and one month, respectively. However, it has delivered a massive return of over 1200 per cent in the last five years.
Galaxy Resources Limited
The ASX-listed global lithium company, Galaxy Resources Limited (ASX: GXY) holds brine assets, hard rock mines and lithium production facilities in Canada, Argentina and Australia. The company operates and wholly owns Mt Cattlin mine in Ravensthorpe Western Australia and James Bay lithium pegmatite project in Quebec, Canada. The company is also planning for the advancement of lithium and potash brine project, Sal de Vida in Argentina.
The company has recently released its operational and financial updates for the first half of the financial year 2019. During the half-year, Galaxy focussed on operational execution at Mt Cattlin that reported a record quarter of production in Q2 2019. The operational outcomes achieved at Mt Cattlin included strong production volumes and enhanced product quality and lower operating costs. The company has targeted for the production volume of 45,000 – 55,000 dmt, and shipment volume of 60,000 – 70,000 dmt for Q3 2019.
The company reported a decline of 68 per cent in its revenue from ordinary activities from US$ 88.4 million in H1 2018 to US$ 28 million in H1 2019. Galaxy reported a loss of US$ 172 million for the period attributable to its members. The company’s cash position remained strong during the half-year, stimulated by the profits received from the POSCO deal. The cash balance of the company rose significantly from US$ 45.1 million in H1 2018 to US$ 176.3 million in H1 2019.
GXY ended the trading session at $1.140, with a rise of 0.89 per cent relative to the last closed price. The stock’s market cap was recorded at $462.7 million, with approximately 5.03 million shares in rotation. The stock has generated a substantial return of 380.85 per cent in the last five years.
Lithium Australia NL
Lithium Australia NL (ASX: LIT) is a Perth-based company that intends to supply sustainably and fairly sourced materials to the battery industry across the world. The company has created a portfolio of alliances and projects and developed pioneering extraction processes to transform all lithium silicates to lithium chemicals. The company plans to generate advanced components from these chemicals for the lithium-ion battery industry.
The company has recently established the potential for new supply stream based on recycled battery products by recovering critical battery metals from spent lithium-ion batteries. In a recently conducted test work with ANSTO (Australian Nuclear Science and Technology Organisation), it has been found that LIT’s proprietary refining technology generates lithium phosphate of more than 99.9 per cent purity with expected lithium recoveries of more than 85 per cent. The nickel and cobalt recoveries have also been estimated at over 90 per cent in the test work.
In its recently released annual report, the company reported an operating loss after income tax of $11.57 million for the year ended 30 June 2019 against a loss of $8.1 million in the prior corresponding period. The company also recorded a working capital surplus of $2.48 million and a cash balance of $2.7 million at the end of FY19. The below table summarises the key financial metrics reported by the company:
LIT closed the trading session flat at $0.046 on 20th September 2019, with about 385k shares in rotation. The stock has delivered negative returns of 43.40 per cent, 24.59 per cent and 9.80 per cent in the last six months, three months and one month, respectively. However, it has delivered a return of over 170 per cent in the last five years.
Lake Resources NL
New South Wales-headquartered Lake Resources NL (ASX: LKE) focusses on the development of lithium projects. The company holds five significant projects in Argentina, with four of them located within South America’s Lithium Triangle. Around 50 per cent of the world’s lithium resource is produced from the Lithium Triangle at the lowest cost.
The company reported high-grade final results from its Cauchari Lithium Brine Project in August this year. The results highlighted an intersection of lithium brines over 506 metres from 102 metres to a larger depth of 608 metres, the base of the hole.
The company released its quarterly results for the quarter ended 30th June 2019 in July this year. The company had a cash balance of $1.8 million as at the end of the quarter. The below table summarises the key financial metrics reported by the company:
LKE ended the trading session at $0.042, with a rise of 5 per cent relative to the last closed price. The stock’s market cap was recorded at $20.94 million, with approximately 968k shares in rotation. The stock has generated a substantial return of 900 per cent in the last five years.
Hawkstone Mining Limited
Hawkstone Mining Limited (ASX: HWK) is an ASX listed company focused primarily on the development of a low -cost lithium project in America's battery corridor. The company owns 100 per cent interest in Lordsburg and Big Sandy Projects that are situated within the United States Battery Corridor. The company is rapidly de-risking the Big Sandy lithium project, and fast tracking towards a JORC Estimated Resource soon.
Hawkstone informed about a 15 per cent increase in the Exploration Target from the additional exploration for its Big Sandy sedimentary lithium project on 28th August 2019. The company also notified about the completion of the Phase 2 drill program that would help the company in estimating a maiden JORC compliant resource in Northern Mineralised Zone by the September end.
Hawkstone released its quarterly results for the quarter ended 30th June 2019 in July this year. The company had a cash balance of $2.02 million as at the end of the quarter. The below table summarises the key financial metrics reported by the company:
HWK ended the day’s trade flat at $0.015 on 20th September 2019, with about 406k shares in rotation. The stock has delivered negative returns of 11.76 per cent and 25 per cent during the last six months and three months, respectively.
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