Could these 3 renewable energy stocks surge as lithium demand grows?

With the demand for alternative energy sources and materials to store such energy increasing, I see an opportunity. Indeed, some renewable energy stocks have done well in recent years – and I expect there to be big winners in the coming years.

As demand for lithium increases, there are three London-listed companies that I think could benefit.

Atlantic Lithium

Share on Atlantic Lithium (LSE: ALL) has fallen 29% over the past 12 months. In five years, they have risen, but only 9%.

The stock fell sharply this month after online reports cast doubt on the prospect of lithium mines in Ghana. The Atlantic said that “immediately denied the allegations of impropriety made by the Report“. However, the stock remains lower than at the beginning of the month.

The company announced today that drilling has begun on its flagship Ewoyaa project in Ghana. If the project lives up to its potential, it could mean the Atlantic becomes a significant lithium producer. This could mean a rise in stocks.

Kodal Minerals

There is currently an imbalance of supply and demand in the lithium market.

This means more miners are trying to bring their lithium projects online. But while supply is set to increase, so is demand. So I think lithium mining can continue to grow, potentially boosting the price of renewable energy stocks like that Kodal Minerals (LSE: CODE). The company’s flagship project in west Africa is quite large and has attracted new investment from large Chinese miners.

This helps explain why Kodal shares have increased in value by more than 50% year to date in 2023.

The company has other projects in its portfolio and Chinese investment could help it expand. Again, higher lithium prices could help Kodal’s stock rise strongly, depending on the success of its project’s operations and commercialization.

I like the prospect of the Kodal key mine. But I see a risk in the value of the company being tied to a single asset that has not yet entered commercial production and in a volatile country.

Rio Tinto

mining giant Rio Tinto (LSE: RIO) is involved in extracting various minerals from the earth – including lithium.

This means that it can benefit from the increase in demand for lithium from battery manufacturers. It has the mining, marketing and distribution muscle to commercialize lithium assets at scale.

The diversified nature of the giant’s established portfolio means that even rising lithium prices are likely to be of limited benefit to Rio Tinto’s share price. But if the bottom line falls out of the lithium market, Rio’s overall business can still do quite well.

Should I buy it?

This renewable energy stock is doing well. So should I buy it for my portfolio?

No, I don’t.

Atlantik and Kodal both remain unproven when it comes to large-scale commercial production. Both are highly dependent on the main project. The business profile does not match my risk tolerance.

In contrast, I like Rio’s wider and more diverse portfolio of projects. But for now, I think the global metal price cycle could go down again, affecting profits at the company. So I’m watching the stock, but have no plans to buy it right now.