Smart Money in the Lithium Sector Betting on Future Global Demand
POINT ROBERTS, Wash. and DELTA, British Columbia, Feb. 27, 2019 (GLOBE NEWSWIRE) -- Investorideas.com, a leading investor news resource covering AI and lithium stocks issues the first article in a two-part series looking at the increased global demand for lithium and how smart money is betting on its long-term growth.
Leading the bullish sentiment is the world’s largest producer of lithium, Albemarle Corp. ( NYSE: ALB ), reporting fourth quarter results on February 20th, with a headline of ‘ALBEMARLE ENDS 2018 STRONG; PROJECTING CONTINUED GROWTH IN 2019’.
Fourth quarter net sales were $921.7 million, an increase of 7% over the prior year; earnings were $129.6 million, or $1.21 per diluted share, an increase of 162% over the prior year. Fourth quarter adjusted EBITDA was $264.3 million, an increase of 8% over the prior year; adjusted diluted earnings per share was $1.53, an increase of 14% over the prior year.
The long term investment potential of lithium is not being missed by Standard Lithium Ltd. ( TSXV: SLL.V ) ( OTCQX:STLHF ), a specialty chemical company focused on unlocking the value of existing large-scale US based lithium-brine resources, who recently announced it has entered into a funding equity agreement with a syndicate of underwriters led by Canaccord Genuity Corp., for gross proceeds of $10,500,000 (CAD).
The net proceeds from the Offering are expected to be used by the Company for advancing its existing asset portfolio and for general working capital purposes. The Company’s flagship project is located in southern Arkansas, where it is engaged in the testing and proving of the commercial viability of lithium extraction from over 150,000 acres of permitted brine operations utilizing the Company’s proprietary selective extraction technology based on AI (artificial intelligence) technology.
Looking at the outlook for the sector, Zacks Research reported following Albemarle’s fourth quarter numbers, with the headline ‘Lithium ETF at One-Month High: Here’s Why’, “Such upbeat guidance and facts boosted investors’ confidence about lithium demand. Albemarle’s results acted as a cornerstone for the industry. Shares of other key lithium producers also gained on Feb 22.”
Albemarle is part of the top 10 holdings of the Global X Lithium & Battery Tech ETF, a fund that invests in the full lithium cycle, from mining and refining the metal, through battery production. Other companies in their top ten include FMC Corp., LG Chem Ltd., Byd Co., Samsung, GS Yuasa Corp., Enersys, Panasonic and Tesla Inc. ( NASDAQ: TSLA ).
Looking at supply and demand, Tesla says, “To ramp production to 500,000 cars per year, Tesla alone will require today’s entire worldwide supply of lithium-ion batteries.”
So, Tesla bet big money and in 2014 began construction on the Tesla Gigafactory to supply enough batteries to support Tesla’s projected vehicle demand.
BYD Company Limited, the Chinese leader in the EV game is following suit, albeit a few years later, and just announced it has broken ground on a new 20 GWh battery gigafactory for electric cars, investing $1.49 billion USD in the facility.
The lithium market has not been without its setbacks though, as Nemaska Lithium Inc. ( TSX: NMX.TO ) ( OTC: NMKEF ) recently announced that it has terminated its multi-year supply agreement with Livent Corporation. The Supply Agreement pertains to the provision of up to 8,000 tonnes per year (28,000 tonnes in total during the term of the contract) of lithium carbonate starting April 1, 2019.
While some see this a major issue, one news article stated that, “Growing evidence points toward a supply-side which will continue to struggle to deliver as Nemaska Lithium Inc. move to terminate a multi-year agreement to provide lithium carbonate to Livent Corp. The deal with Livent, spun out of major US lithium producer FMC Corp., saw Nemaska provide up to 8,000 tpa of lithium carbonate starting in April 2019. However these examples only serve to highlight supply instabilities across an infant industry.”
Looking at the recent volatility in the sector, while seeing a bullish future, Metalbulletin.com reported, “While the supply side is weighing on sentiment, the demand side of the equation remains extremely bullish - and increasingly so.”
Demand for lithium is without question on the rise in the near and far reaching future, and while the industry has suffered minor blips and supply instabilities, smart money is betting on a bullish future for lithium and the stocks in the sector, with a leader Albemarle and juniors like Standard Lithium doubling down on what is looking like a sure thing.
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