Listed Lithium

The battery materials series continues with lithium producers.  Even though lithium is not the primary metal in a lithium ion battery of any size, it is still an important component. There is about 7 kilograms of lithium in Tesla’s 85-kilowatt hour battery.  By contrast lithium AA battery cells have about 8 grams of lithium content.  We look at the companies that are bringing lithium out of the ground and thereby playing a part powering our cars and computers.  

Lithium is a soft, silvery-white metal that heads up the alkali metals group on the periodic table of elements.  It is behaves atrociously around water and is not an easy keeper from a storage standpoint.  Besides battery components it has applications in ceramics, vision glasses and alloys for aircraft. 

Igneous rocks called spodumene are the primary source of lithium ‘in the raw.’  However, lithium can also be extracted from lithium chloride salts that build up in brine pools.  Indeed, the largest producers of lithium are located in Chile and Argentina where lithium is extracted from brines in the Atacama Salt Flats.  Australia also figures prominently in lithium production as well with its supply coming from joint mining operations with gold, cobalt and other minerals.

Given the dominance of Australia and South America in lithium production it is no surprise that American and Australian companies dominate lithium materials production.  Investors looking for a good play on the transition of the economy from the combustion engine to electric power will find a mixed bag among these lithium companies.

A quick check of stock exchanges in North America and Australia markets resulted in a list of twenty-four companies, eleven of which are in production and generating revenue.  Another thirteen companies are pursuing development projects at a range of stages from early to near commercial sales.  Revenue in the most recently reported twelve months provides a good clue as which are in each group.

Listing Country	Company	Ticker	Mkt Cap Mlns	Revenue Mlns
U.S.	FMC Corp.	FMC	12,770.0	3,330.0
U.S.	Albemarle Corp.	ALB	14,600.0	2,910.0
U.S.	Sociedad Quimica y Minera	SQM	15,720.0	2,140.0
Australia	Altura Mining Ltd.	AJM.AX	706.3	1,270.0
Canada	Ococobre Ltd.	ORL.TO	1,450.0	17.2
Australia	Galaxy Resources Ltd.	GXY.AX	1,610.0	15.0
Canada	Lithium Americas Corp.	LAC.TO	995.1	4.1
Australia	Pilbara Minerals Ltd.	PLS. AX	1,960.0	2.1
Australia	Red River Resources Ltd.	RVR.AX	137.2	0.3
Australia	Global Geoscience Ltd.	GSC.AX	367.1	0.1
Australia	Kidman Resources	KDR.AX	649.7	0.1
Canada	Advantage Lithium Corp.	AAL.V	164.5	na
Canada	Bacanora Minerals Ltd.	BCN.V	252.3	na
Canada	Critical Elements Corp.	CRE.V	232.6	na
Canada	Dajin Resources Corp.	DJI.V	23.1	na
Canada	International Lithium	ILC.V	17.4	na
Canada	Lithium X Energy Corp.	LIX.V	221.1	na
Canada	Nemaska Lithium, Inc.	NMX.TO	786.5	na
Canada	Neolithium Corp.	NLC.V	268.4	na
Australia	Piedmont Lithium Ltd.	PLL.AX	86.3	na
Canada	Pure Energy Minerals	PE.V	56.7	na
Canada	Rock Tech Lithium, Inc.	RCK.V	49.6	na
Canada	Sirios Resources, Inc.	SOI.V	42.7	na
Canada	Ultra Lithium, Inc.	ULI.V	11.2	na
Currencies match listing country

The lithium ion battery story seems to have been heard everywhere and is impacted valuation metrics.  Top producers are trading at lofty multiples of sales, earnings and cash flows.  Only three operations in the group of twenty-four actually generate cash, a fact that should give investors pause before choosing a lithium stock.  The most modestly priced lithium stock in terms of cash flow is Albemarle Corporation (ALB:  NYSE), which has a diversified product line that includes a variety of specialty chemicals besides lithium compounds.  However, it is another diversified chemical company in the U.S. that presents the best bargain in terms of multiples of sales and earnings.  FMC Corporation (FMC:  NYSE) offers agriculture solutions and health and nutrition products in addition to lithium.  It has apparently delivered well enough to gain investor respect, trading at 3.83 times sales and 17.88 times forward earnings.

Among the developmental stage companies is Piedmont Lithium (PLL:  ASX).  It is working in the Carolina Lithium Belt in North Carolina where there is proven tin-spodumene resource.  It represents the only U.S.-based lithium source underdevelopment.  As a U.S. source, Piedmont could have a sales edge with U.S. electric vehicle manufacturers who are under pressure from consumers to bring responsible and sustainable products to market.  Foreign mineral sources are often tainted by issues of excessive water use, child and coerced labor, or high carbon footprint.

Ticker	Last Price	52 Week Low	52 Week High	Volume    000s	Price/ Sales	Price/       F-EPS	Price/ CFO
FMC	95.14	56.35	95.78	200	3.83	17.88	29.75
ALB	132.11	85.60	144.99	291	5.01	25.63	41.19
SQM	59.74	27.95	63.80	609	7.36	32.10	na
AJM.AX	0.39	0.12	0.47	12,149	555.71	na	na
ORL.TO	6.83	2.73	6.88	76	84.49	na	neg
GXY.AX	3.96	1.52	4.08	4,470	107.11	na	235.38
LAC.TO	11.25	3.80	14.06	222	242.44	neg	neg
PLS. AX	1.20	0.31	1.25	24	943.46	na	neg
RVR.AX	0.28	0.17	0.34	1,840	407.42	na	neg
GSC.AX	0.28	0.06	0.32	2,410	3,345.39	na	neg
KDR.AX	1.84	0.34	1.94	3,710	7,012.88	na	neg
AAL.V	1.19	0.36	1.42	416	na	na	neg
BCN.V	1.90	1.01	2.00	4	na	na	neg
CRE.V	1.56	0.48	1.86	278	na	na	neg
DJI.V	0.16	0.08	0.22	224	na	na	neg
ILC.V	0.19	0.07	0.23	51	na	na	neg
LIX.V	2.48	1.40	2.54	766	na	na	neg
NMX.TO	2.08	0.95	2.25	324	na	na	neg
NLC.V	2.29	0.85	2.45	369	na	na	neg
PLL.AX	0.19	0.19	0.20	na	na	na	neg
PE.V	0.43	0.38	0.70	132	na	na	neg
RCK.V	1.50	0.75	2.16	17	na	na	neg
SOI.V	0.32	0.25	0.56	66	na	na	neg
ULI.V	0.48	0.14	0.80	55	na	na	neg

Expect this list to change over time.  One of the world’s largest supplies of lithium is actually in Bolivia at the planet’s largest salt flat called Salar de Uyuni.  This salt flat is largely undeveloped and is likely to gain interest as the established lithium producers look for ways to expand production.  Some of the companies on the foregoing list may not survive as fickle capital markets move on to other higher priced battery materials like cobalt. 

Lithium has not been a major sector with companies devoted exclusively to lithium production.  Total revenue for the sector has been around $1 billion per year.  However, that might change as the market expands to meet demand from the battery manufacturers.  Some of the stronger companies now in development stage could survive as the first pure play lithium companies, but other may welcome a buyout from a larger player.  The latter is certainly a welcome outcome to a micro-cap or small-cap investment.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.