If there has been one sector that has been grabbing a lot of attention so far in 2021, it is lithium. After surviving a treacherous couple of years with low prices for the battery focused commodity, these lithium shares are now flourishing.
Image source: Getty Images
Electric vehicle demand lifting lithium shares
The growth story stems from an undeniable boom in electric vehicles (EV), with beneficiaries being the likes of Tesla Inc (NASDAQ: TSLA), Nio Inc (NYSE: NIO), and Xpeng Inc (NYSE: XPEV). As governments and regulatory bodies step up measures to reduce emissions, EVs are gaining traction.
The explosion in demand is shown by the International Energy Agency report in 2020. Reportedly, EVs on our roads have gone from 17,000 to 7.2 million in the space of a decade. McKinsey & Company noted that in 2019 EVs only made up 2.5% of global vehicle sales. Demonstrating the capacity for growth in the market.
IEA estimated, depending on sustainability policies, annual lithium demand for electric vehicles alone could increase by between 120% to 350% by 2030. So, the question posed is, where are we going to get all this lithium from?
Have you seen these #lithium demand forecasts for #EV #batteries 🔋 from the IEA #batterytwitter @sdmoores @VivasVK7 ? Interestingly incl error bars for dif chemistries but is even in high demand scenario at <20% of BMI 2030 projection 🤔 https://t.co/6dfc5iLeye pic.twitter.com/Bs6Glxy3zj
Martin Beuse (@mart_di_be) September 19, 2020
Here are 5 ASX listed lithium suppliers taking on the task of future-proofing supply, with big share price rallies to boot.
Lithium shares exploding this year
Pilbara Minerals Ltd (ASX: PLS)
Pilbara Minerals is most notable for owning the world's largest, independent hard-rock lithium operation. Unlike some miners in the space, Pilbara Minerals is solely a lithium miner. The company's Pilgangoora Project in Western Australia produces both spodumene and tantalite concentrate, supplied to its global offtake partners.
Recently, Pilbara Minerals completed its $201 million acquisition of neighbouring lithium operation, Altura Mining Limited. In the miner's equity raising presentation, Pilbara outlined the benefits of its acquisition – these include the opportunity to remove duplicate services and infrastructure; dual open-pit mines offering flexibility, common logistics chains.
The Pilbara share price has been on a tear in the last few months, gaining 240%. Remarkably, shares reached a 52-week low of 13.5 cents during the COVID-19 crash. Since then, the share price has rallied strongly to a 52-week high of $1.47. A 294% return in 12 months certainly is nothing to turn the nose up at.
At the time of writing, the Pilbara share price has plummeted 15.7% to $1.15 as trading nears the close today.
Lithium Australia NL (ASX: LIT)
Lithium Australia aims to address the increasing lithium demand a little differently. Although Lithium Australia does own lithium assets, the company has been undertaking a rationalisation of its portfolio and redirecting some of its focus onto battery recycling technology. Through the use of its SiLeach and LieNa lithium extraction processes, Lithium Australia aims to convert lithium silicates from a low-value state (mine waste, unused fines) to a high-value state.
This strategy has been evident recently with the company divesting 80% of its interest in the Greenbushes South Lithium Project in Western Australia to Gulan Lithium Limited (ASX: GLN). Lithium Australia remains onboard of the project, with the new structuring represented by a joint venture (JV) between the two.
Furthermore, earlier in the week, Lithium Australia announced that VSPC was granted a patent for its nano-powder production process. This process reportedly is a simpler solution than traditional methods for producing complex metal-oxide nanoparticles used in lithium-ion batteries.
Clearly, this vertically integrated approach is resonating with investors. Lithium Australia shares have climbed 234% in the last few months. Shares at currently trading hands at 17 cents, giving the company a $135 million market capitalisation.
Orocobre Limited (ASX: ORE)
Orocobre is mostly known for its Olaroz lithium facility in Argentina. The facility had been maintained through the low lithium price period by diligent cost control measures by management. In the fourth quarter of FY20, costs were down 22% on Q1 costs. This enabled the $2 billion producer to deliver positive cash flow. However, we are now in a different scenario with lithium prices lifting.
The company is priming for the demand uptick with its stage 2 expansion of Olaroz. The annual general meeting in November last year indicated this is 44% complete at that time. At completion, stage 2 is expected to increase production capacity by nearly 170% to a minimum of 40ktpa.
Additionally, Orocobre is nearing completion of the Naraha lithium hydroxide plant, of which it has a 75% invested interest in Naraha will be utilised to produce battery-grade lithium from non-battery grade lithium carbonate. The output will be supplied to Toyota Motor Corp and Panasonic Corporation's JV, Planet Energy & Solutions.
Shares in Orocobre have jumped 118% in 3 months to their current price of $5.90, notching up a 65% gain for the last 12 months.
Vulcan Energy Resources Limited (ASX: VUL)
The biggest gainer on this list, Vulcan Energy and its share price. This lithium share has gone from a tiny mineral explorer, trading at 21 cents a year ago; to a beastly $7.87 per share miner with reportedly the largest Joint Ore Reserves Committee (JORC) compliant lithium resource in Europe.
Vulcan aims to be a 'zero carbon lithium producer' with its Upper Rhine Valley resource in Germany. The company is still undergoing assessments and studies to comprehensively understand the economics and potential of harnessing geothermal energy in the brine recovery process for its site.
The pre feasibility study has been completed, subsequently, the definitive feasibility study is expected to come next. As the name suggests, this study should provide a definitive and conclusive answer to the potential for the development of its Zero Carbon Project dream.
The Vulcan share price has returned a miraculous 565% in 3 months. Even more awestriking, the 1-year return for this share is now 3480% – unbelievable!
Piedmont Lithium Ltd (ASX: PLL)
Piedmont finds itself in an exclusive club, a supplier to Tesla. With the lithium producer being situated in North Carolina, United States, it presents itself as a logistical opportunity for US-based demand.
In order to meet the expanding lithium demand, Piedmont recently announced a strategic partnership with Sayona Mining Ltd (ASX: SYA). This agreement will see the acceleration of Sayona's lithium projects in Quebec, Canada. Piedmont takes an initial 9.9% invested interest in Sayona as a part of the partnership.
The deal is advantageous for Piedmont, as the conditions include lower and upper bounds for the delivered spodumene concentrate from Sayona – a minimum of US$500 per tonne and a maximum of US$900 per tonne.
The Piedmont share price has returned a respectable 54% in the last 3 months. However, far more impressively, the 1-year return is 373%. Piedmont shares are trading hands at 61 cents at the time of writing.
