The global prices for lithium carbonate, a rare earth mineral that forms the basis of lithium-ion batteries, have continued their downward trend. In 2023, prices plunged more than 80%, but after that epic slump, investors and traders had been hoping prices had reached a bottom and the market would exhibit signs of recovery.
For the most part, lithium price growth has been uneven with a rally in prices during the end of the first quarter and continuous slump since mid-April. Waning demand in the electric vehicle (EV) sector is primarily to blame. In essence, EV producers are still working through their lithium inventories, which has not prompted them to purchase more rare earth minerals from their suppliers.
Lithium producers, in turn, have seen their margins compress and public lithium companies have seen their valuations plummet. There are signs that the price slump may be nearing a bottom and EV producers will begin to restock on their lithium supplies, ultimately benefitting miners.
At the end of the day, investing in lithium stocks has to be a long-term game. Below are 3 lithium stocks trading at attractive prices for investors who want to just put $1000.
Sociedad Química y Minera de Chile (SQM)
Headquartered in Santiago, Chile, Sociedad Quimica y Minera de Chila (NYSE:SQM) or “SQM” is a diversified mining company that generated about $7.4 billion in fiscal year 2023. Over the years, SQM has invested heavily to have a piece of the “lithium rush.” The miner’s lithium production facilities are primarily located in Atacama Desert in Chile, where SQM has exclusive rights to caliche ore and brines, which contain high levels of lithium.
Moreover, SQM has been very keen to increase its exposure to lithium hydroxide, which is a powdery substance that goes into electric batteries. The lithium miner has earmarked around $2 billion of capital to facilitate efficiencies in its lithium hydroxide production. Lithium hydroxide, according to SQM, is more expensive to produce but the higher quality is worth the investment. Unlike many of its competitors, SQM has continued to invest heavily despite lithium prices being as low as they are; this could help better position the miner as prices as well as demand begin to rebound.
The icing on the cake for long-term investors is SQM relatively cheap valuation. The lithium miner trades at 8.1x forward earnings.
Sigma Lithium (SGML)
The second lithium miner investors should consider for a $1000 investment is Sigma Lithium (NASDAQ:SGML).Although based in Canada, Sigma Lithium mining operations are in Brazil, and the miner has 100% ownership of the Grota do Cirilo, Genipapo, Santa Clara, and São José mines. The Grota do Cirilo mining operations have been particularly successful. In a May press release, Sigma Lithium revealed that the mine’s provable reserves had increased 40% from 54.8 million tons to 77 million tons, which would effectively increase the life of the mine to 25 years.
Similar to SQM, Sigma Lithium is also injecting significant amounts of capital into expanding production facilities.According to Sigma Lithium, the expanded reserves of Grota do Cirilo will allow the miner to create a third and potentially fourth facility.
Sigma Lithium share price is around $12.30 as of the end of Monday’s trading session, and the company sits at a trading valuation of 18.3x forward earnings.
Global X Lithium & Battery Tech ETF (LIT)
Investing in one or two lithium companies may be a risky bet for some investors. Exposure to a plethora of companies competing in the space and creating battery supply chains may be a more worthwhile investment. Global X Lithium & Battery Tech ETF (NYSEARCA:LIT) could provide a comfortable level of diversification. The exchange-traded fund manages more than $1.3 billion in capital and has allocated it to some 48 holdings.
LIT’s holdings not only include lithium miners, like Albemarle (NYSE:ALB) and Pilbara Minerals(OTCMKTS:PILBF) but also battery producers LG Energy and Panasonic (OTCMKTS:PCRHY) as well as diversified electric vehicle behemoths Tesla (NASDAQ:TSLA) and BYD (OTCMKTS:BYDDY).
Given all the downward pressure on lithium and EV stocks, LIT has not had a good run over the past 12 months, but if lithium market prices are approaching a bottom, buying up some LIT shares now might not be a bad idea.
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.
