Hello fellow apes,
A lot has happened in the lithium world in the past few months. I am going to try to summarize why I’m bullish on Lithium of Americas (NYSE: LAC) https://www.lithiumamericas.com/. There are a lot of positive points, but also risky ones; but scared money does not make money.
Lithium of Americas is a junior company that is currently developing “two world-class lithium projects”:
– Thacker Pass Project in Nevada (100% owned)
It is the largest known lithium deposit in the United States with probable reserves of 3,1Mt of lithium carbonate equivalent. https://www.mining-technology.com/features/top-ten-biggest-lithium-mines/
– Cauchari-Olaroz in Argentina (49% owned)
LAC is currently developing this project jointly with Ganfeng Lithium and the site contains and estimated amount of 3.6Mt of lithium carbonate equivalent. https://www.nsenergybusiness.com/projects/cauchari-olaroz-lithium-project/
Both sites have an estimated lifespan of about 40 years.
For information, the stock went from $2.14 at the start of the pandemic to $28.75 in January 2021 and is currently sitting at $15.30.
As you know, due to environmental concerns, EV are starting to weight more and more in the eye of the consumers (hello Nio and Tesla stocks in 2020). Thus, some countries and states are announcing the end of petrol and diesel cars. For example:
– UK will ban petrol and diesel cars by 2030. https://thedriven.io/2020/09/22/uk-to-accelerate-ban-on-petrol-and-diesel-vehicle-sales-to-2030/
– Norway will ban petrol and diesel cars by 2030. https://www.fleeteurope.com/fr/safety//article/norway-ban-new-fossil-fuel-cars-2025?a=FJA05&t%5B0%5D=Tesla&t%5B1%5D=CO2&t%5B2%5D=Fuel&curl=1#:~:text=From%202025%2C%20it%20will%20be,agreement%20on%20this%20radical%20measure.
I will not list every country that is aiming at banning fossil fuel cars from their roads; the list would be too long. But as you can see, more and more are willing to reach this goal.
Furthermore, more and more historic car makers are starting to look in this direction, competing with newcomers. For example:
– Hyundai is aiming at reducing its production of petrol and diesel cars by 50% and only sell EV by 2040. https://trak.in/tags/business/2021/05/29/hyundai-reduces-production-of-petrol-diesel-cars-by-50-aims-to-sell-10-lakh-electric-cars/
– Ford is anticipating that EV (in general) will represent 40% of vehicles by 2030 and the company will invest 30 billion in the next 4 years in this segment. https://edition.cnn.com/2021/05/26/investing/ford-electric-vehicle-investment/index.html
All of these points have a common denominator: batteries. EV currently need lithium (among other things) for the battery (about 10kg/22 pounds each). https://www.barrons.com/articles/new-risk-tesla-other-electric-vehicle-makers-lithium-supply-batteries-51601498472.
Furthermore, vehicles sales are estimated to reach 117 million units worldwide. I know it’s a quick and maybe too easy solution, but it can give an estimate: if we combine this with the estimation of Ford (40% EV in 2030), EV will represent 47 million vehicles, thus 470’000t of lithium will be required. In 2019. Worldwide lithium production in 2019 amounted to 77’000Mt (https://pubs.usgs.gov/periodicals/mcs2020/mcs2020-lithium.pdf); production will need to be multiplied by 6 to reach the desired amount to build enough batteries for EV.
I am betting the increased demand for lithium will drive the price higher than it ever was. The latter is slowly recovering and gradually increasing (https://www.fastmarkets.com/commodities/industrial-minerals/lithium-price-spotlight).
Unlike Piedmont Lithium who already signed a contract with Tesla, LAC has not. If the lithium price continues to increase, the longer they wait, the higher their asking price will be and the higher their revenue will be.
Costs of extractions are estimated to be <$4’000/t at their future facilities in Nevada and Argentina and the lithium carbonate price is currently sitting at about $12’000/t. If the price continues to increase, we can clearly see that their profits will skyrockets… (https://www.lithiumamericas.com/thacker-pass/).
Furthermore, LAC received in January 2021 from the Bureau of Land Management the approval of the Thacker Pass Lithium Mine (https://eplanning.blm.gov/public_projects/1503166/200352542/20033308/250039507/Thacker_Pass_Project_ROD_signed_2021-01-15.pdf) A few more autorisations are expected to be delivered late summer (water, air quality,…)
Joe Biden is also defending its $174 billion proposal to support the transition to electric vehicles. https://robbreport.com/motors/cars/president-biden-174-billion-electric-cars-1234604827/
Now, unto the risks:
As soon as LAC received the approval, some people filed a lawsuit (https://www.courthousenews.com/wp-content/uploads/2021/02/Bartell_BLM_COMPLAINT.pdf) against the Bureau of Land Management, alleging that environmental impacts (on groundwater for example) were downplayed.
Two administration officials told Reuter a few days ago that “Biden will rely on ally countries to supply the bulk of metals needed to build electric vehicles and focus on processing them domestically into battery parts” (https://www.reuters.com/business/energy/biden-looks-abroad-electric-vehicle-metals-blow-us-miners-2021-05-25/). This could be a threat to US miners, but LAC already received the approval (the project is still on hold due to the lawsuit).
In my mind, the positive outweighs the negative, but it’s still a risky investment and I believe in LAC.
Feel free to add anything that I might have missed.
1’300 shares at 11$
And 1’825 shares of another future Lithium producer in Europe (but can’t say the ticker here).
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