With slowing demand due to elevated interest rates, the mining sectors have probably been some of the most hit. Despite lithium carbonate prices having risen more than 11% on a year-to-date perspective — likely due to a strengthening market in China — lithium carbonate prices have fallen more than 53% over the past twelve months. Other precious metals like silver and zinc have also had lackluster performance until very recently.
This all means mining stocks have been some of the most shorted for months, and several of them continue to feature high short interests. Below are three 3 stocks short sellers have been targeting.
Albemarle (ALB)
Albemarle (NYSE:ALB) is the world’s largest supplier of lithium for electric vehicles. The company’s shares also carry a short interest figure of 9.26%, meaning nearly 10% of the shares outstanding are being shorted by speculators. This makes sense when you look at the broader EV market. Prices wars and falling sales figures are plaguing even the largest players. Tesla (NASDAQ:TSLA) just posted its first year-over-year decline in deliveries since the pandemic era. The EV market is struggling and this will extend to lithium prices at some point or another.
ALB generated over $7 billion in revenue in 2022 due to elevated lithium prices. Unfortunately, in 2023, the pressure of falling lithium prices have decreased both top-line and bottom-line figures. In its Q4’2023 earnings report, fourth quarter revenue declined by 10.1%, while EPS declined by 160%. While these estimates came above what Wall Street was predicting, markets still haven’t been kind to ALB shares. The lithium producer’s stock price has fallen more than 12% since the start of the year.
Sigma Lithium (SGML)
Our next entry is another lithium miner with a similar story. Originally from Canada but headquartered in Sao Paulo, Brazil, Sigma Lithium (NASDAQ:SGML) wholly owns and operates the Grota do Cirilo project in Brazil, one of the largest hard-rock lithium deposits in the world. The project has an estimated resource of 54.8 million tons of spodumene ore at an average grade of 1.4% lithium oxide. Sigma Lithium’s project is also located close to major ports and infrastructure in Brazil, giving it access to key markets in North America, Europe and Asia. The company also has a long-term off-take agreement with Mitsui & Co. (OTCPK:MITSY), a Japanese trading giant that previously provided Sigma Lithium with financing and logistics support.
Still, these features have not stopped short sellers from targeting the company’s shares. SGML has a short interest of 9.41%. Lackluster performance in the EV market appears to be the cause. Sigma Lithium’s stock has dropped 54% on a year-to-date basis, again primarily due speculation around the weakening electric vehicle market situation.
Shares are currently trading at a valuation of 5x forward earnings, which is cheaper than most other lithium competitors.
Hecla Mining Company (HL)
Hecla Mining Company (NYSE:HL) provides precious and base metal properties in the United States, Canada, Japan, Korea and China. In particular, the company mines for silver, gold, lead, and zinc concentrates, as well as carbon material containing silver and gold for custom smelters, metal traders, and third-party processors. The miner happens to be one of the largest silver producers in the U.S. Hecla Mining’s flagship project is the Greens Creek mine, which is located in southeast Alaska.
Through its 100% ownership of the Greens Creek mine, Hecla was able to generate $720 million in revenue in 2023, but loss more than $84 million on its bottom line. Revenue growth from 2022 to 2023 was essentially flat. Slow growth of silver prices was likely the cause of such anemic growth. Hecla has a short interest of 2.70%.
On the date of publication, Tyrik Torres 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.
