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Highlights
- Companies involved in producing and selling lithium are called lithium stocks.
- Lithium Americas is set to receive a $650 million equity investment from General Motors Co.
- Allkem’s Olaroz lithium facility produced record lithium carbonate in the fourth quarter of 2022.
Lithium stocks are companies that engage in mining, processing, and distributing lithium. Electric vehicles (EVs) and renewable energy sources like wind and solar both employ rechargeable batteries, mostly made of the elemental metal lithium.
Lithium can play a crucial role in the energy transition since several nations and large companies have committed to carbon neutrality by the year 2050. Additionally, achieving net-zero emissions will need an increased reliance on lithium supply, both new and recycled.
However, the only option for investors to have exposure to this elemental metal at present is through purchasing lithium stocks. Like other metals, lithium is still not a commodity that investors can buy.
Having said that, let’s see how these two TSX-listed lithium companies have been doing lately:
Lithium Americas Corp. (TSX:LAC)
Lithium Americas Corp. owns three under-development lithium production assets in Argentina and Nevada. The first project, Cauchari-Olaroz is set to begin operations in the first half of 2023, followed by Thacker Pass and Pastos Grandes to start production in the mid of the 2020s and the late 20s, respectively.
Earlier this week, Lithium Americas announced entering a purchase agreement with General Motors Co. (GM) and providing the construction plan of its Thacker Pass lithium project, the largest known lithium resource in the US.
Under the purchase agreement, GM will split a $650 million equity investment into two payments to Lithium Americas. The initial $320 million payment will be made by GM acquiring 15 million common shares of Lithium Americas at a cash price of $21.34 per share. GM will invest an additional $330 million as the second installment in Lithium Americas' US business.
Phase 1 production at Thacker Pass is expected to start by the second half of 2026; this will enable Lithium Americas to produce enough lithium required to manufacture one million EVs yearly.
Allkem Limited (TSX:AKE)
The industrial chemical and mineral exploration company Allkem Limited (formerly Orocobre Ltd.) has lithium production facilities in Mt. Cattlin, Olaroz, Sal de Vida, and Naraha. In addition to producing lithium, Allkem also produces boric acid, salar mineral resources, refined minerals, etc. Allkem's primary markets are Argentina and Australia, with a total market share of about C$ 8.1 billion.
The Allkem group generated US$ 265 million in revenue and about US$ 218 million in gross operating cash margin for the December 2022 quarter. Allkem's quarterly income from the sale of lithium carbonate reached a record high of over US$ 151 million, with a gross cash margin of 90%.
The company’s one of the two primary lithium production facilities, the Olaroz, produced a record 4,253 tonnes of lithium carbonate in Q4’22, a 17 per cent increase from the same period last year. Mt Cattlin, on the other hand, produced 16,404 dmt of spodumene, achieving revenue of US$ 83 million, 5 per cent higher than the last quarter.
Bottom Line
Although, the demand for lithium stocks has risen dramatically in the past few years on the back of increasing demand for electric vehicles and renewable energy sources. But the stock market is unpredictable, and nothing is guaranteed; therefore, investors should conduct extensive market research before investing.
Please note, the above content constitutes a very preliminary observation based on the industry and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
