Demand for electric vehicles is increasing.
With more than half of all cars expected to be electric by 2040, it’s no wonder that companies like GM set to invest $2 billion to increase the production of its electric vehicles.
The growing interest in more environmentally friendly vehicles is causing investors to look at associated products that could reap rewards down the, ahem, road. One of the most obvious candidates is batteries. Specifically, lithium batteries. After all, electric vehicles can’t go very far if they don’t have any way of storing energy. And now, lithium batteries account for 37 percent of total lithium consumption
Resulting largely from the popularity of electric vehicles, demand for lithium is expected to double over the next five years to 820,000 tons, according to Statista. With more EVs taking to the streets and roadways of the world, the need for efficient and safe energy storage is also on the rise.
But, while the way we make cars and trucks has remained relatively unchanged over the years, the batteries we use have become harder to make as finding a good source for lithium becomes more difficult.
That’s not to say that lithium itself is rare. On the list of elements, it’s the 33rd most common and pretty common all around the world. The difficulty arises because, when it is found, it is usually widely dispersed. Lithium is usually found in salt flats, but spread over such a large area that it makes it difficult to harvest. So there are only a few places in the world where production is worth the investment.
For example, the Bolivian salt flats are believed to house over 70 percent of the world’s lithium. But due to the complicated nature of extracting the element, the process is expensive and dangerous. It also requires around 500 thousand gallons of water for every ton of lithium pulled out of the ground.
Other major producers of lithium are China, Australia, and Argentina. A series of dry salt lakes in western Afghanistan is also believed to house a large deposit of lithium.
Electric vehicles and the lithium batteries that fuel them are also getting a boost from governments around the world. As world governments look to regulate emissions and improve fuel efficiency, many have passed down mandates to car companies that they will need to sell a certain amount of electric vehicles each year.
Moreover, electric car mega-company Tesla is investing heavily in the technology. Its Gigafactory is massive manufacturing plants in Nevada that makes lithium-ion batteries. The Gigafactory was built out of necessity, as Tesla sees it. After all, as Elon Musk himself said, “With a planned production rate of 500,000 cars per year in the latter half of this decade, Tesla alone will require today’s entire worldwide production of lithium ion batteries.”
Investing In Lithium
All of that is to say that lithium presents a lot of potential for investors. Especially if you’re looking for lithium penny stocks.
Where, exactly, you want to get involved in the production chain is up to you. But there is opportunity everywhere from the mining companies pulling the raw material out of the ground to those developing the final products.
Here are five lithium penny stocks to watch in the coming months.
1. QMC Quantum Minerals Corp ($QMC)
QMC Quantum Minerals Corp is a Canadian exploration company. QMC explores and evaluates potential resource properties. Many of its interests are wrapped up in lithium exploration.
Headquartered in Manitoba, Quantum Minerals’ primary asset is the Cat Lake property, which holds historical reserves of 1.2Mt grading 1.5 percent lithium oxide.
Another key asset is its Irgon lithium property, a historic rare metals deposit where the Lithium Corporation of Canada has begun development work. Quantum Minerals has been working on its own exploration of the area.
In April, QMC announced it was in talks with the Sinomine Group to process spodumene material, which would eliminate the necessity for a concentrator. In November, Quantum Minerals’ stock price exploded 320 percent after it announced a $1.6 million private placement at the same time it revealed it had completed sampling.
A recent announcement from the Canadian government may prove beneficial to the company. Justin Trudeau’s government recently announced it would allocate $3.3 billion to invest in companies building electric vehicles and batteries within Canada. Quantum Minerals says it is ideally positioned to take advantage of this investment.
2. CBAK Energy Technology, Inc. ($CBAT)
CBAK Energy Technology has seen a lot of upward potential in the last few months. In September, the company’s stock rallied from under $1 per share to around $3.75. There were brief moments were premarket trading of CBAT reached $4.16.
This China-based company basically epitomizes what we’ve discussed up to this point. After all, CBAK manufactures lithium-ion batteries and electric energy solutions.
A few months ago, the company announced that its 32140 large-sized cylindrical tabless battery had passed its technical and pilot plant tests. That meant that the company could move on to building a new standardized production line for the product, which it aims to make deliverable in the first half of 2021. Interestingly, tabless batteries are now something that Tesla is also concentrating on.
A company like CBAK may have seemed hard-pressed to follow up such big moves, but the stock saw even more gains in November, ending November 16 higher by 83.7 percent. It remains unclear exactly why the company’s stock spiked so much. There were no earnings releases and no company news to precipitate the move. However, one theory is that the stock saw a boost following a note from JP Morgan. The note investment note gave positive marks to China’s “new energy vehicles” sector, and predicted that sales of electric cars, hybrids, and fuel cell vehicles could grow as much as 43 percent annually over the next five years. Of course, all of those cars will need batteries, and a company like CBAK is well-positioned to provide them.
3. American Lithium ($LI)
American Lithium is a company that is all in on lithium. This firm is based in Nevada and is focused on the acquisition, exploration, and development of lithium products.
Its primary property is the Tonopah Lithium Claims project in Nevada, but it is also exploring the Extinction Ridge in Nevada’s Roberts Mountains. The latter is a potential vanadium play, according to the company’s website.
American Lithium’s stock price has ebbed and flowed along with industry reports around the electric vehicle industry. Some investors believe a positive report from Wood Mackenzie regarding the upward potential of the EV industry was enough to send American Lithium’s stock up by as much as 16.1 percent in September.
Indeed, American Lithium may be one of the best lithium penny stocks due to its diversification.
Moreover, samples from the company’s 2019 drill program showed high lithium reserves, and the company started a similar drill program in February 2020. Its quarterly earnings reports have been relatively solid in the last few months.
4. Lithium Americas ($LAC)
This is another Canadian resources firm, this one located in Toronto. Lithium Americas owns about 400 thousand acres of land, ideally situated in the “Lithium Triangle.”
Car manufacturer Mitsubishi owns an equity interest in the company, specifically due to its need for lithium batteries.
Lithium Americas has partnered with Chinese lithium producer Gangeng Lithium to develop the Caucharí-Olaroz project in Argentina. Production from this project is expected to begin in early 2021, with an output capacity believed to be 40,000 tonnes per year. However, the coronavirus pandemic has put a pause on the beginning of operations there.
Construction activities at Caucharí-Olaroz were suspended temporarily as Argentina mandated a country-wide quarantine. The company was permitted to resume limited activities in mid-April, but was forced to enact its own coronavirus protocol in July after workers tested positive at the site. The project is currently 47 percent complete, according to the company’s own second quarter results.
Once completed, the Caucharí-Olaroz project will be the third largest lithium brine resource on the planet, with the life of the project expected to last for about 40 years.
On top of the Caucharí-Olaroz project, Lithium America has a 100 percent stake in the Thacker Pass lithium claystone project located – once again – in Nevada. This project grew special attention following Tesla’s Battery Day after Elon Musk announced his company had found a way to process lithium from clay using table salt and water.
5. Pilbara Minerals ($PILBF)
Pilbara Minerals operates out of Western Australia. Most interestingly to investors, the company signed a contract with General Lithium of China for the export of lithium products. This shows that the company is looking towards increased revenues as the have already begun ramping up their lithium production.
Moreover, the company recently received a sizeable donation from the Australian government. The Clean Energy Finance Corporation (CEFC) was established by the Australian government to facilitate increased flows of finance into the clean energy sector. The CEFC recently committed up to US$36.7 million on top of an original investment of $15 million made in 2017.
“CEFC finance enables this important work to continue when it steps up during times of economic uncertainty and we hope that this syndicated facility will allow the opportunity for other banks to participate shortly,” the company said at the time.
As part of the investment, Pilbara said it will implement additional sustainability targets at certain operations, which will include installing renewable energy, implementing emissions measurement, and monitoring to better manage carbon impacts and developing planning to achieve net zero emissions in its operations over time.
All of that is to say, Pilbara is a company that is already investing in its future. A sure sign that it is confident it will be around long enough to see returns on those investments.
Lithium stocks aren’t without their risks.
While the push for environmentally sustainable modes of transportation seems to have garnered the support of politicians and governments around the world, regime shifts in important regions could have a negative impact on government investments in the sector.