Commodities & Metals

5 US Lithium Miners Getting a Boost From Planned Expansion in Chile

Share prices for five of the country’s top lithium companies have received a nice boost over the past couple of days, thanks to an announced offering of five new mining contracts soon to be available in Chile. According to the latest data from the U.S. Geological Survey, Chilean reserves total 9.2 million metric tons (tonnes), nearly double Australia’s second-largest pile of 4.7 million tonnes.

On Wednesday, Bloomberg reported that the Chilean government is planning to award five licenses for 80,000 tonnes each. The winners will have seven years to explore and develop projects and 20 years of production. That equates to 4,000 tonnes of production per license or 20,000 tonnes per year. In 2019, Chilean lithium production totaled 19,300 tonnes, and production is forecast to dip to 18,000 tonnes this year.

Battery-grade lithium carbonate prices have risen from $19.40 per kilogram last month to a midpoint of $20.50 per kilogram, and from $20.10 per kilogram for lithium hydroxide to $20.50 in the same span, according to Fastmarkets. That’s a jump of 11.4% for lithium carbonate and a gain of 2% for lithium hydroxide.

Two firms currently are extracting lithium from Chile’s Atacama salt flat: Chilean-based Sociedad Química y Minera de Chile S.A. (NYSE: SQM) and North Carolina-based Albemarle Corp. (NYSE: ALB). Presumably, both can (and almost certainly will) bid on one of the new licenses. There are four other U.S.-based lithium miners, only one of which seems a possible bidder on one of the Chilean licenses, but all are likely to benefit in the short term from what appears to be a shortage of lithium supply in the near term.

Albemarle is the largest U.S.-based lithium miner by market cap. A month ago, the company settled a five-week labor strike at its Salar plant in the Atacama. Albemarle also has operations in Argentina and other locations. Over the past five days, Albemarle’s share price has increased by around 4.6%. The stock traded at $229.76, up 2.7% on Thursday, in a 52-week range of $90.07 to $253.10. The consensus price target on the stock is $230.95.

Livent Corp. (NYSE: LTHM) produces lithium carbonate, lithium hydroxide and other products at two plants in Argentina. Livent could choose to bid for a chance to extract lithium from Chile’s massive deposits, but it will need to dress up its balance sheet. Over the past five days, Livent’s shares have gained about 2.7%, to trade at $26.53, up less than 1%, late Thursday morning. The stock’s 52-week range is $9.88 to $27.28, and the consensus price target on the stock is $25.18.

Lithium Americas Corp. (NYSE: LAC) is based in Canada and also has operations in Argentina. The company recently received approval to begin exploration and development of a lithium mine in northern Nevada. Shares have added about 6% in the past week to trade Thursday at $25.25, down about 1.5% on the day. The consensus price target on the stock is $25.84.

Standard Lithium Ltd. (NYSEAMERICAN: SLI) currently operates the Lanxess project on leases in southwestern Arkansas. With a market cap of just $1.5 billion, the company is probably too small to take advantage of Chile’s offer but in a good position to take advantage of rising prices for lithium. The company reported some good news on another Arkansas project earlier this week, and that has given the shares an added boost. The share price has soared by 12.8% over the past five days and traded at around $10.00, up about 3% for the day. The stock’s 52-week range is $1.33 to $10.19, and that high was posted Thursday. There is no analyst coverage of the stock.

Piedmont Lithium Inc. (NASDAQ: PLL) owns a 100% interest in a lithium project in North Carolina. The company has an agreement with Tesla to supply the carmaker’s planned chemical plant in Texas beginning between July 2022 and July 2023. In August, that agreement for 53,000 tonnes annually of spodumene concentrate (a precursor to lithium hydroxide) was postponed by mutual agreement. Piedmont’s stock is up about 5% over the past week and traded up about 3.7% Thursday morning to $62.30, in a 52-week range of $19.38 to $88.97. The consensus price target on the stock is $81.57.