New report highlights volatility of lithium stock investing

August 24, 2023

A report from Bloomberg details the extreme volatility of investment in lithium stocks during the past year.

According to data compiled by Bloomberg the lithium sector has been home to some of volatile returns on the benchmark S&P/ASX 200 Index with some stocks doubling in value and others losing 50 percent of their value.

Lithium mining is dominated by small and mid-sized firms in Australia, the world’s No.1 producer of the critical electric vehicle battery ingredient. Previously unknown companies have soared in value after striking large deposits of lithium-bearing spodumene, mainly in Western Australia, while others have sputtered on uncertainty.

Among the stocks that have soared during the past year are Azure Minerals Ltd. which surged more than 1,100 percent. It rejected a takeover bid from Chilean lithium producer SQM and has shot past its offer price of A$2.31. Patriot Battery Metals Inc., which is developing a large lithium deposit in Canada, has jumped 81 percent.

Liontown Resources Ltd. has surged 105 percent to lead the Australian gauge in 2023 after spurning three takeover bids in five months from the world’s top lithium producer Albemarle Corp. Meanwhile, peer Lake Resources NL has plummeted more than 70 percent after flagging a six-year delay and cost blowouts at a project in Argentina. The nation’s benchmark is up 1.2 percent.

Demand for lithium has surged in recent years as carmakers, driven by climate policies, attempt to reinvent themselves as EV manufacturers. That’s put a spotlight on stocks such as lithium miners that are part of the supply chain.

Reuters reported that automaker Stellantis said it would invest more than $100 million in California's Controlled Thermal Resources, its latest bet on the direct lithium extraction (DLE) sector amid the global hunt for new sources of the electric vehicle battery metal.

The investment by the Chrysler and Jeep parent comes as the green energy transition and U.S. Inflation Reduction Act have fueled concerns that supplies of lithium and other materials may fall short of strong demand forecasts.

In South Korea, there’s a similar frenzy for shares perceived as being tied to the metal. Hydro Lithium Inc. skyrocketed more than 1,500 percent in 2022 after the little-known civil engineering firm changed its name from Korea SE Corp. and created plans for EV battery-related businesses. Chemicals firm Kum Yang Co. has jumped more than 400 percent this year on its link with a Mongolian lithium mine.

Australia’s lithium shares have tended to soar when companies announce a discovery, often with little regard to its size, accessibility or grade, said Carrick Ryan, portfolio manager at Westbeck Capital Management, an early investor in Pilbara Minerals and Patriot Battery Metals.
Spot prices of lithium carbonate — a refined form of the metal — have been on a wild ride. They climbed to a record in November as a global push toward an electrified transport fleet fired up consumption, before plunging this year as supply pressures eased.

 Photo credit Azure Minerals. 


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