Given the commercial uses for lithium, demand for lithium-related stocks has been growing over the past few years. Even though shares in this area have risen in value when I look at long-term performance, there are still some stocks that I feel are very good value. When I consider what this sector could be worth in the next decade, here are some ideas I like and am considering.
A fully-funded mine project
Kodal Minerals (LSE:KOD) is a lithium exploration and development company focused on projects in West Africa. The share price is up 34% over the past year.
It caught my attention recently due to securing $117.5m in funding from a Chinese business. With $65m allocated to the flagship Bougouni lithium project, it means that costs are covered. This takes away a key risk for many exploration projects, which is that money can run out before it’s finished.
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There’s still the obvious risk that lithium can’t be viably mined from the project for some unknown reason.
But I feel the stock is a bargain because the market cap is only £63m at present. The life-of-mine forecast revenue is £1.62bn!
A positive ESG contender
Another UK-listed lithium company is CleanTech Lithium (LSE:CTL). It’s a small business like Kodal, with a market cap of £62m. The share price has jumped by 52% over the past year.
It currently has three projects ongoing in Chile, which is seen as a good source of lithium for the future. It also attracts ESG investors, given that it states that it plans “to be the greenest lithium supplier to the EV market.”
Net zero commitments are great, but if the company can’t monetise the projects, it won’t count for much. Another concern I have is that the four largest shareholders alone hold almost 39% of the total shares.
I think there’s value here when comparing the current company size versus the net present value of some of the projects. For example, the Laguna Verde value is estimated to be in the billions alone. If one takes off, there’s clear room for the stock to outperform.
Taking advantage of a fall
Finally, a hot lithium stock getting attention right now is Atlantic Lithium (LSE:ALL). Some would say it’s a bargain, down 48% in the past year. Most of this fall came recently due to a negative short seller report, criticising the company.
I feel that there isn’t much basis for some of the accusations and that the share price should shake it off over coming months and years.
The business’s flagship project is Ghana’s first lithium-producing mine, which has good potential. A report I saw estimated the life-of-mine revenue at £3.9bn. Granted, there are plenty of hurdles to overcome before the cash comes rolling in, but it certainly has caught my eye.
Given the high-risk nature of these type of stocks, I’m keen to invest but will only do so with a small amount of money.
