Probably the hottest asset across a heating up commodity sector right now is lithium as investors remain excited about the prospect of rising prices thanks to growing electric car production over the decade ahead.
Lithium powers the rechargeable batteries in electric cars such as those manufactured by Tesla and also powers renewable energy batteries such as that recently installed in South Australia by Tesla in order to help meet the state’s electricity shortages.
However, lithium pricing remains opaque with the world’s leading producer being China and it generally being traded between a relatively small number of producers and customers.
There’s also no lithium futures contract at the London Metals Exchange, with no price data provided by market leaders such as Bloomberg or Reuters.
It’s estimated that the lithium price gained more than 35% in 2017, with many junior Australian miners seeking to get their share of the action in supplying what’s claimed to be the “new iron ore” or “metal of the future”.
Below are some of the miners that have been on fire thanks to the hype.
Galaxy Resources Ltd (ASX: GXY) is an investor favourite and market leader which hit a record share price high of $4.25 today. The stock is up 52% over the past year and the miner’s Mt Cattlin operation is in production, while it also owns a potentially lucrative mining tenement in Argentina. Galaxy posted a positive operating cash flow of $14.2 million for the quarter ending September 30 2017 and looks the best bet for anyone buying into the lithium story.
Orocobre Limited (ASX: ORE) is ramping up production of lithium concentrate at its Argentine mines and expects to sell its lithium for “more than” US$11,000 a tonne for the quarter ending December 31 2017. Notably this is below prices that are widely quoted in the mainstream media, which goes to show part of the difficultly in investing in a product with such opaque pricing.
Argosy Minerals Ltd (ASX: AGY) has seen its shares lift 1,480% over the past year from 2.5 cents to 40 cents. However, it’s yet to bring any lithium production online via its tenement in Argentina. Production is expected to commence soon, but it remains a speculative bet.
AVZ Ltd (ASX: AVZ) is on the lithium bandwagon and exploring for it in Africa’s Congo. It posted an operating loss of $1.29 million for the quarter ending September 30 2017 has nothing in the way of revenues and a market value more than $400. As such it looks a bit of a punt.
Others looking to cash in on lithium are Kidman Resources Ltd (ASX: KDR), Sayona Mining Ltd (ASX: SYA) and Pilbara Minerals Ltd (ASX: PLS). While US-listed miners such as FMC Corp and Albermarle are also emerging and starting to ramp up lithium production.
It seems likely they’ll be a handful of big winners from rising lithium demand, but far more investing losers and this looks a space for serious investors to tread in carefully.
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The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.