Investors looking for cheap lithium stocks likely understand the immense growth potential the sector offers. The rapid growth in electric vehicles has spurred rapid growth in demand for lithium, a chemical element that is a key component in EV batteries. In short, there is no EV revolution without lithium.
With demand significantly outpacing supply, lithium prices have soared over the past few years. Although it’s possible prices will contract this year, led by a slowdown in the Chinese market, analysts expect high demand will continue to support prices.
“While some normalization of current high spot prices is possible, on the contract side, we believe that the market will remain tight in 2023, with insufficient supply coming on stream,” Vulcan Energy Resources (OTCMKTS:VULNF) CEO and Managing Director Francis Wedin recently told S&P Global Commodity Insights.
Perhaps one of the best-known lithium plays is Albemarle (NYSE:ALB). Shares of the specialty chemicals company rocketed 584% from a March 2020 low below $50 to an all-time high of $334.55 in November. However, shares currently sit 28% below that high. This decline comes amid a pullback in lithium prices from their all-time highs and concerns about how a faltering economy may impact EV sales, especially in China, the world’s largest EV market.
Yet, for investors who are willing to play the long game, there are a number of cheap lithium stocks to consider. Just keep in mind that the names below carry a good deal of risk, especially those that fall into the penny-stock category. But for those who are not afraid to speculate, the names below could deliver explosive gains.
|LITM||Snow Lake Resources||$2.51|
|GNENF||Ganfeng Lithium Group||$8.05|
Cheap Lithium Stocks: Snow Lake Resources (LITM)
Snow Lake Resources (NASDAQ:LITM) is a mineral exploration firm headquartered in Winnipeg, Canada. Following a recent acquisition, the company owns the rights to 59,587 acres of land, of which only 1% has been explored. According to Snow Lake, that 1% has proven to contain 11.1 million metric tonnes of lithium.
Beginning in 2025, Snow Lake expects to produce 160,000 tonnes of 6% lithium spodumene a year over a 10-year period, or enough to manufacture around 5 million EV batteries.
While its potential is clear, Snow Lake Resources is a pre-revenue firm and could remain that way for some time. Unlike most of the cheap lithium stocks on today’s list, however, it has the advantage of being a Nasdaq-listed security. The Nasdaq is a centralized network, whereas the over-the-counter market shares listed here rely on broker-dealer networks not classified as stock exchanges. Additionally, the company’s relative proximity to North American vehicle manufacturing supply chains should be a positive.
Just one analyst covers the stock, but they have a one-year target price of $15. This would represent a gain of nearly 500% from current levels.
Tearlach Resources (TELHF)
Vancouver-based Tearlach Resources (OTCMKTS:TELHF) is an exploration company that is expanding its lithium footprint. Just this week, the firm said it will acquire two more lithium mining projects in Canada, bringing its total Canadian projects to five.
According to the company, it has brought together the world’s leading lithium experts to discover what it calls “super lithium,” or the high-grade lithium needed to produce batteries. The management team in question includes Paul Chow, co-founder and former CEO of Rock Tech Lithium (OTCMKTS:RCKTF), and Lindsay Bottomer, who was part of the team that discovered one of the world’s biggest copper-gold mines.
Some recent developments in the Great White North could bode well for Tearlach. First, it’s rumored that Tesla (NASDAQ:TSLA) is considering Canada as a potential location for its next gigafactory as part of its strategy to produce 20 million EVs a year by the end of the decade. To achieve this goal, Tesla will require a lot of high-quality lithium, which Tearlach could help provide.
Further, in November, it was reported that the U.S. military was considering funding Canadian mining projects as a way to decrease dependence on China for critical minerals such as lithium.
As another pre-revenue company and penny stock, shares carry a lot of risk. However, given their low price, investors may feel that the potential upside in Tearlach far outweighs the risk of taking a small position here.
Cheap Lithium Stocks: Ganfeng Lithium Group (GNENF)
China-based Ganfeng Lithium Group (OTCMKTS:GNENF) “covers a wide swath of the lithium battery supply chain, from lithium resource development, refining and processing to battery manufacturing to battery recycling,” according to the company.
As I mentioned earlier, China is the largest electric vehicle market in the world. China’s share of global EV sales is projected to have exceeded 60% in 2022, up from 48% in 2021.
Ganfeng is positioned to become a global powerhouse in the industry. Already, the company bills itself as China’s largest lithium metal producer and the world’s third-largest. By 2030, Ganfeng plans to produce at least 600,000 tonnes of lithium carbonate equivalent a year, boosting its capacity by fivefold over 2021 levels.
The stock has struggled since topping out in August 2021 above $22 a share, as investors became leery of Chinese stocks amid heightened tensions and regulatory uncertainty. Today, shares trade for around $8.
Yet, analysts remain bullish on GNENF. Of the 13 who cover it, 11 rate it a “buy” or “overweight,” with one “hold” and just one “sell” rating. Their average price target is $88.16. For investors who are willing to accept the risk GNENF entails, a move to that level would mean a return of 995%, or a near 10-bagger.
Pilbara Minerals (PILBF)
Located in the Pilbara region of Western Australia, Pilbara Minerals (OTCMKTS:PILBF) calls itself a lithium pure-play, “owning 100% of the world’s largest, independent hard-rock lithium operation.” The company currently oversees two fully operational projects and is looking to expand, in part through a joint venture with South Korea’s POSCO Holdings (NYSE:PKX). It also has a long-term off-take deal with Ganfeng Lithium.
Pilbara Minerals experienced rapid revenue and profit growth in fiscal 2022 and ended the year with a strong cash balance of $874.2 million. As the company noted in its fiscal year 2022 annual report, this was due to “strong production and pricing underpinned by increasing global demand for lithium, primarily driven by the transport sector and the electrification of vehicles.”
Moreover, as SeekingAlpha contributor Orchird Research points out, in the company’s first quarter of fiscal 2023 alone, sales nearly surpassed those for all of FY 2022. And the company’s cash position swelled to nearly $1.4 billion.
Over the past six months, shares have rocketed higher by more than 40%. The good news is that analysts see continued upside over the next 12 months, with an average target price of $3.60. That implies upside of 29% from current levels, while long-term investors could see much greater rewards as demand for lithium continues to increase.
Cheap Lithium Stocks: Lithium Americas (LAC)
Lithium Americas (NYSE:LAC) is one of the cheap lithium stocks that I have been bullish on for some time. The company is nearing production, is well funded, and controls a significant and strategically important lithium asset.
The company is developing mining operations in Argentina, at Cauchari-Olaroz and Pastos Grandes, and in Nevada, at Thacker Pass. The Thacker Pass operation is in the process of receiving rights to begin construction. The Thacker Pass lithium resource is thought to be the largest known lithium resource in the United States.
The importance of the Thacker Pass should not be understated. The federal government is investing heavily in the development of a U.S. lithium supply to support burgeoning domestic EV manufacturing. Provided things go Lithium Americas’ way in court, the company should see investment dollars flow in and shareholders should see a spike in the stock.
While LAC is up more than 9% so far this year, it is much closer to its 52-week low than its 52-week high. In fact, a move back to that high, made in March, would provide investors with a 95% return. Of course, if things don’t pan out for Lithium Americas in court, be prepared for a sharp downward move.
Mineral Resources (MALRF)
Mineral Resources (OTCMKTS:MALRF) is the second of the cheap lithium stocks with operations in Western Australia. Rather than a lithium pure play, though, the company is diversified across iron ore and lithium mining, as well as renewable and non-renewable energy. Along with its subsidiaries, Mineral Resources offers “pit-to-port mining and mining logistics services — including exploration, planning, mine design and construction, the construction and operation of minerals process facilities, commodity transportation and marketing services.”
Mineral Resources’ lithium segment is a 50/50 joint venture with Ganfeng Lithium. You’re probably noticing that Ganfeng Lithium, in addition to its own operations, invests heavily in the sector. Ganfeng’s success and scale should assure investors that Mineral Resources is a reasonable investment as well.
The two firms are working to increase production at Mount Marion in Australia. In April, they said they planned to boost annual production of mixed-grade spodumene concentrate from 450,000 tonnes to 600,000 tonnes, in addition to planned upgrades that would boost capacity to 900,000 tonnes a year in early 2023.
MALRF has delivered solid returns for investors, up 32% over the past 12 months and 258% over the past five years. Of the 16 analysts covering the stock, 13 rate it a “buy” or “overweight,” with three “holds” and no “sells.” Their average price target of $97.61 represents upside of 63%.
Cheap Lithium Stocks: Noram Lithium (NRVTF)
Last up on today’s list of cheap lithium stocks to buy is Canadian exploration and development company Noram Lithium (OTCMKTS:NRVTF), which is working to bring the Zeus Lithium Project to production in Nevada. This asset is strategically located next to the Silver Peak mining operations of Albemarle, the world’s largest lithium producer, and Tesla’s Nevada gigafactory.
Among its 2022 highlights, Noram Lithium said it secured $14 million in strategic financing that will keep it fully financed through the end of this year. In addition to a strong cash position, the company is debt free. Moreover, it could get funding from the U.S. government, which is looking to bolster domestic lithium production.
With a share price of less than 50 cents and no revenue to speak of, Noram Lithium is clearly a speculative investment. However, if the stock can hit the target price of $2.01, investors could see a return of 337% from current levels.
On the date of publication, Alex Sirois 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.