This photo taken on March 12, 2021, shows a worker with car batteries at a factory for Xinwangda Electric Vehicle Battery Co., which makes lithium batteries for electric cars and other uses, in Nanjing, China.
STR/AFP via Getty Images
Shares of early stage lithium miner Lithium Americas were rising Tuesday trading after a bullish note from J.P. Morgan. The note is good news for Lithium Americas investors, but some of the firm’s observations also apply to the rest of the lithium mining industry.
Lithium Americas (ticker: LAC) stock was up 9% on Tuesday. The S&P 500 and Dow Jones Industrial Average were up about 1.4% and 1.2%, respectively.
J.P. Morgan analyst Tyler Langton wrote Tuesday that there are “lots of catalysts ahead to support [Lithium Americas] stock in a choppy market.”
Trading has been choppy indeed. Lithium Americas stock has fallen about 30% since the end of November. Corporate fundamentals can’t really be blamed. Instead, Lithium Americas is a development stage miner. The company didn’t generate sales in 2021. Higher inflation, rising interest rates and geopolitical tensions between Russian and Ukraine have sapped investors’ willingness to hold more speculative stocks.
That explains the recent price action, but the stock is down while commodity pricing is up. The “stock price largely followed the steady increase in lithium prices in [second half 2021], but they have decoupled more recently,” observed Langton. Lithium carbonate prices have moved to $62,000 per metric ton from $31,000 a metric ton at the end of November.
Lithium carbonate is a key benchmark price for lithium product. Those products are key components in lithium-ion batteries. Battery demand is growing as production of electric vehicles grows around the world.
Lithium Americas stock isn’t the only lithium mining stock that is down since the end of November. Piedmont Lithium (PLL) shares were down 18% over the same span. Albemarle (ALB) and Livent (LTHM) shares fell about 15% and 25%, respectively, since the end of November.
The rising commodity price-falling commodity stock paradox is an opportunity, according to Langton. His note is about Lithium Americas, so his observations focused on that company’s catalysts.
In particular, Langton sees a favorable permitting outcome for Lithium Americas by the end of the first quarter at the company’s Thacker Pass project, the company’s lithium project in Nevada.
Lithium Americas also has a project in Argentina that is due to start up in 2022. That is called the Cauchari-Olaroz project and is jointly owned with a Chinese company.
Upcoming earnings can also be a catalyst for Lithium Americas as well as the rest of the sector. Lithium mining leader Albemarle reports fourth-quarter numbers on Thursday. Investors and analysts will hear more about pricing, demand and expansion project from management on that day.
Write to Al Root at [email protected]
