- Lithium Americas (LAC) traded as high as $41.56 before slumping to about $24
- Demand still outweighs supply
- For a greener future, we need as much lithium as possible
The last time I weighed in on Lithium Americas (NYSE: LAC), I said, “The world is running short of lithium supply, while demand explodes.”
That was on November 15, as shares of LAC traded around $33 a share.
Shortly after, it would trade as high as $41.56 before slumping to about $24. Today, the LAC stock is back up to $37.05, and I’m still as bullish as I was in November. In fact, with several big catalyst ahead of it, I’d like to see Lithium Americas closer to $50 a share.
| LAC | Lithium Americas | $38.22 |
One, Lithium Demand Still Outweighs Supply
Governments all over the world wants millions of electric vehicles on the roads. Plus, according to BloombergNEF, about two-thirds of autos will be electric by 2040. All as the world attempts to ditch internal combustion engines for emission free electric vehicles.
There’s just one tiny problem. There’s not enough supply to meet that kind of demand. That’s because no one really saw this kind of demand coming.
“There is the quadrupling of demand in just five years and probably a growth of six or seven times over 10 years. So, clearly the industry is not prepared today for that level of demand – the amount of incremental capacity that the industry needs over the next 10 years is at least 1.5 million mt and in terms of capital investment, will probably require $45 billion-$50 billion of investment into new projects or expansions of existing operations,” said iLi Markets partner Daniel Jimenez, as quoted by S&P Global Platts.
Two, the U.S. Government May Offer Support
The U.S. government could soon throw its weight — and mone — behind lithium.
There’s speculation President Joe Biden could invoke a Cold War-era defense law, all in an effort to boost domestic production of metals needed to make EV batteries. According to a Bloomberg report, that defense law could allow the government to use a $750 million Title III fund to help increase domestic production of essential metals and minerals, such as lithium. That could be extremely beneficial for companies, like Lithium Americas.
Three, Lithium Americas May Be Close to Production
At the moment, Lithium Americas Thacker Pass project may be the closest to development, with plans to begin construction later this year. Should that happen, the LAC stock could double, if not triple on the idea it can help the U.S. meet more of its lithium needs.
At Thacker Pass, “Results of a Feasibility Study on the first phase of Thacker Pass (for at least 30,000-35,000 tpa of lithium carbonate) are expected by year end. Engineering is underway to consider a 20,000 tpa lithium hydroxide chemical conversion plant, to provide flexibility to meet potential customer and partner needs,” according to a recent company press release.
I’m also waiting on progress at its Caucharí-Olaroz mine, which could see production later this year, and produce up to 40,000 tonnes per year.
The Bottom Line
With global governments pushing for a greener future, we need as much lithium as possible. Unfortunately, there’s just not enough supply to satisfy that demand at the moment. However, with a potential Cold War-era defense law, and news LAC is close to development, Lithium Americas could see significant upside potential, near-term.
As I noted above, “Governments all over the world wants millions of electric vehicles on the roads. Plus, according to Bloomberg NEF, half of all auto sales by 2035 will be electric. All as the world attempts to ditch internal combustion engines for emission free electric vehicles.”
Right now, that can’t happen. Hopefully, Lithium Americas can help.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
