A year ago, the spot price of a metric ton (tonne) of battery-grade lithium was around $13,300. Today, that same tonne is selling for around $68,800. Nearly 75% of global lithium production makes its way into batteries for electric vehicles, electricity storage, portable power tools and dozens of other products.

According to the U.S. Geological Survey (USGS), worldwide lithium production rose to 21% to 100,000 tonnes in 2021, not including production from U.S. mines. For competitive reasons, the USGS does not publish U.S. production data.

Global reserves of lithium total 22 million tonnes of the metal that “have a reasonable potential for becoming economically available within planning horizons beyond those that assume proven technology and current economics.” Identified resources (reserves plus inferred reserves) worldwide total about 89 million tonnes. Currently, Chile (9.2 million tonnes), Australia (5.7 million) and Argentina (2.2 million) have the largest reserves. Countries with the most identified resources are Bolivia (21.0 million tonnes), Argentina (19.0 million) and Chile (9.8 million). U.S. identified resources total about 9.1 million tonnes, with known reserves today totaling 750,000 tonnes.

Three of the world’s five largest lithium mining companies trade on U.S. exchanges. China’s Jiangxi Ganfeng Lithium, with a market cap of nearly $33 billion, is the world’s largest lithium miner and trades over the counter in the United States. Another China-based company, Tianqi Lithium, with a market cap of around $23 billion, is the third-largest producer and does not trade in the United States.

While lithium prices are inching down, they remain only about $1,000 from their annual high. Two of the three have already announced March-quarter results, and the third should be reporting earnings by the end of this month. Which one appears to offer the best opportunity for investors? Or will it be one of the other four U.S.-traded lithium miners we have included? The answers may depend on an investor’s risk appetite.

Albemarle

Albemarle Corp. (NYSE: ALB) reported quarterly results last week that beat the consensus earnings per share (EPS) estimate by $0.75 and the consensus revenue estimate by 9.3%. Revenue was 36% higher compared to the first quarter of last year. Last Friday, five brokerages lifted their price targets on the stock by an average of nearly 30%. Half of the 22 analysts covering the stock have a Buy rating and two more have Strong Buy ratings. Albemarle’s market cap is around $26.6 billion.
The “hockey-stick” portion of the demand for lithium is barely getting started the company said. Demand for lithium totaled about 500,000 tonnes in 2021. Albemarle expects that to triple by 2025 and to reach 3.2 million tonnes by 2030. Electric vehicle (EV) production is expected to rise from 6.3 million units last year to 21.7 million in 2025 and 40.6 million in 2030.

In its presentation accompanying the earnings release, Albemarle estimated 2022 capital spending of $1.3 billion to $1.5 billion, up from $954 million in 2021. The company plans to continue paying its annual dividend of $1.58 (yielding 0.65%) and forgo any 2022 share buybacks. With a decent, if not outstanding dividend, Albemarle is going to have to continue showing share price growth from its planned investments in more production to accommodate all those new EVs that will hit the road.

SQM

Sociedad Química y Minera de Chile S.A. (NYSE: SQM) is typically referred to by its ticker and has a market cap of around $21.5 billion. SQM reported a year-over-year sales increase of 57.5% in fiscal 2021, and analysts are forecasting a jump of 96.5% in 2022. Per-share earnings rose 161% last year and are pegged to jump another 213% this year.

Over the past weekend, Chile’s constitutional assembly, which is currently rewriting the country’s constitution, rejected a proposal that would have given the government exclusive mining rights over a variety of minerals, including lithium. The mining industry, predictably enough, did not support the proposal. National copper miner Codelco produced 1.73 million metric tons of copper last year, the most of any copper miner in the world. Chile’s estimated copper reserves are the largest in the world at around 200 million tonnes, more than double the 93 million tonnes in Australia.

When SQM reports March quarter results (expected by the end of May), analysts expect a sequential revenue boost of 36.3% to $1.48 billion and a 33.7% sequential increase in EPS. Of 14 analysts covering the stock, eight have a Buy or Strong Buy rating and another four rate the shares at Hold. In addition to its outlook for share price growth, SQM pays a dividend yield of 2.61%.

Livent

Livent Corp. (NYSE: LTHM) was spun out of FMC in 2018 and currently has a market cap of around $4 billion. Since reporting March-quarter results last week, the company’s stock has been upgraded from Market Perform to Outperform at Cowen, which also raised Livent’s price target from $25.00 to $33.00.
March-quarter revenue rose 17% sequentially and 56% year over year, while adjusted EPS rose 38.6% sequentially and 950% (from $0.02 in 2021 to $0.21) year over year. For the full 2022 fiscal year, 13 analysts covering the stock have a 2022 consensus EPS estimate of $1.21, up 572%, on sales of $817.19 million, up 94.4% over 2021.

Livent expects to increase production by 10,000 tonnes in Argentina by the first quarter of next year and by another 10,000 tonnes by the end of the year. The company believes it can raise its Argentine production from 16,000 tonnes last year to 100,000 tonnes by 2030.

And the Rest

Lithium Americas Corp. (NYSE: LAC), Sigma Lithium Corp. (NASDAQ: SGML), Piedmont Lithium Inc. (NASDAQ: PLL) and Standard Lithium Ltd. (NYSEAMERICAN: SLI) have market caps of $2.95 billion, $1.46 billion, $941.7 million and $849.76 million, respectively. All firmly reside in their developmental stage, and only Lithium Americas is expected to generate any revenue this year. These are the very definition of speculative plays.

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When Lithium Americas reported quarterly results last week, the company focused on its Thacker Pass project in Nevada. A federal court ruling on a key challenge to the mine is due in the third quarter of the year. The company is working on a feasibility study with a targeted capacity of 40,000 tons per year and an expansion to an eventual total capacity of 80,000 tonnes per year.

Sigma Lithium recently upgraded its feasibility study of its Grota do Cirilo project in Brazil, citing an internal rate of return of 424% and a payback period of four months. The company now believes that the project includes 33.6 million tonnes of reserves and 58.9 million tonnes of total estimated resources.

In late March, Piedmont closed an underwritten offer of 2.01 million shares of common stock, raising gross proceeds of $130.8 million. The company said it plans to use the funds to restart operations at a project in Quebec, conduct a feasibility study for a potential project in Ghana, and continue development of its project in North Carolina.

Standard Lithium’s flagship project is the Lanxess direct lithium extraction plant in southern Arkansas. The Lanxess plant is a demonstration project, and the company says it is also pursuing development of some 30,000 acres of brine leases in southwest Arkansas and 45,000 acres of mineral leases in southern California’s Mojave Desert.

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