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Due to the commercial use for lithium, the demand for lithium-related stocks has increased over the past few years. Even though stocks in this area are increasing in value when looking at long-term performance, there are still some stocks that I think are very good. When I consider whether this sector can be worth in the next decade, here are some ideas I like and consider.
A fully funded mine project
Kodal Minerals (LSE:KOD) is a lithium exploration and development company focused on projects in West Africa. This stock price has increased by 34% over the past year.
It caught my attention because it raised $117.5m in funding from the Chinese business. With $65m allocated to the flagship Bougouni lithium project, it means the costs are covered. This eliminates the main risk for many exploration projects, which is that money can run out before completion.
There is still an obvious risk that lithium cannot be mined from the project for unknown reasons.
But I think the stock is cheap given its current market cap of just £63m. Mine lifetime forecast revenue is £1.62bn!
ESG competition is positive
Other lithium companies listed in the UK are: CleanTech Lithium (LSE: CTL). It is a small business like Kodal, with a market capitalization of £62m. This stock price has increased by 52% over the past year.
It currently has three projects underway in Chile, which looks to be a good source of lithium for the future. It also attracts the attention of ESG investors, because it states that the plan “to be the greenest lithium supplier to the EV market.”
A net zero commitment is great, but if the company can’t monetize the project, it won’t count for much. Another concern I have is that the four largest shareholders only hold almost 39% of the total shares.
I think there is value in comparing the current size of the company with the net present value of some projects. For example, the value of Laguna Verde is estimated to be in the billions. If one takes off, there is clear room for the stock to outperform.
Take advantage of the fall
Finally, it’s the hot lithium stocks that are getting attention right now Atlantic Lithium (LSE: ALL). Some would say it’s cheap, down 48% over the past year. Most of this fall was broken due to negative short seller reports, criticizing the company.
I think there is no basis for some of these accusations and the share price should shake up in the coming months and years.
The flagship project of the business is the first lithium production mine in Ghana, which has great potential. The report I saw estimated live mine earnings at £3.9bn. Of course, there are a lot of hurdles to overcome before the cash comes in, but it certainly attracts my attention.
Due to the high risk nature of these types of stocks, I am very interested in investing but will only do so with small amounts of money.
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