The demand for lithium and the interest in lithium stocks has exploded. As a result, the industry has been on the receiving end of significant cash inflows as the automotive industry races to meet electric vehicle (EV) demand.
Lithium Batteries are the most-used type of batteries for EVs and stationary energy storage facilities. From a report on Bloomberg, lithium demand is expected to reach more than 500,000 tonnes by 2025, up from 163,000 tonnes in 2015. That is a compound annual growth rate (CAGR) of approximately 21%. Because of this, the stocks in the industry are becoming heavily sought after.
This is notably the low-end of lithium estimates as well. Canaccord estimates lithium demand can hit 920,000 by 2025. This would imply a CAGR of 47% over the next 10 years. As you can see, there is a wide-range of estimates, but most of them make the situation for lithium stocks very profitable.
Although the demand for electric vehicles has taken center-stage, Lithium use in energy storage is expected to surpass EV use by 2030.
Lithium stocks haven’t performed well in 2018
It hasn’t however, been all roses as of late for these stocks. Once one of the hottest industries, the lithium industry has crashed and burned thus far in 2018. The Global X Lithium & Batter Tech ETF (LIT) is largely considered the industry’s performance barometer. Year to date, LIT has lost approximately 25% of its value.
At the heart of the issue, is that the world’s second largest lithium producer Sociedad Quimica y Minera de Chile (SQM) received permission to triple production at its Chilean properties. The general fear was that it can quickly ramp up production, which would have a negative impact on current prices and could lead to oversupply.
The demand for lithium at the current time could push lithium stocks
Something you should consider is that SQM cannot turn this production on overnight. In the meantime, there is tight supply for lithium, which in the end, can only benefit stocks that strictly rely on the commodity. Lithium supply in 2017 was 236,000 tonnes while demand was 228,000 tonnes. At the rate demand is growing, current producers will have a hard time keeping up.
China has also entered the lithium market in a big way. In 2017, it sold 700,000 EVs, a 40% increase over 2016. According to the International Energy Agency (IEA), China represents over a quarter of the EV market and will own 40% of the market by 2040. As a result, the country is making big investments and signing lithium offtake agreements at a rapid pace.
The recent downward pressure on lithium stocks have provided investors with a better entry point. With that in mind, here are the Top 7 Canadian Lithium stocks. The lithium market is tiny and there are not many producers. As a result, these are stocks that are listed on either the TSX or TSX Venture and have market capitalization greater than $100 million.
Of note, the lithium industry is highly speculative and investors should be prepared for significant volatility!
If you like these top lithium stocks, feel free to have a look at our other top stock lists!
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The Top 7 Canadian Lithium Stocks For 2019
7) Standard Lithium
A new addition to our list of the top lithium stocks in the country, Standard Lithium was recently admitted to NASDAQ’s International Designate Program. This is a big deal for the company as it allows U.S. investors to purchase the company’s stock directly on the OTC board. This should increase the company’s reputation and stock liquidity.
Standard is the the smallest of the lithium stocks on this list but given the significant sector volatility it has flirted with $100 million before.
The company is focused its flagship Smackover lithium brine project located in southern Arkansas. It is currently building its pilot plant where it will test and prove the commercial viability of the project.
Standard Lithium is using its proprietary selective extraction technology at the mine. It has partnered with specialty chemicals corporation LAXESS Corp. The industry is looking for innovated solutions such as Standard Lithium’s to help ramp up production to meet demand.
6) Neo Lithium Corp.
Neo Lithium is listed on the TSX Venture Exchange and is an early-stage lithium exploration and development company. It’s flagship property, the 3Q Lithium Brine Project is in the province of Catamarca, Argentina.
The 3Q mine is touted as being the lowest critical impurity brine project in the world. The plant is fully permitted and the pilot plant is built and in commission. The pilot plant is operational and has the capacity to produce 100 tonnes per year of battery grade lithium carbonate. It is the fifth largest brine project in the world.
The company expects to begin construction on a commercial scale lithium mine in 2019 and anticipates the ramp-up time to be approximately three years. Full-production is not expected to commence until 2023. Make no mistake, this one of the longer term stocks on this list.
5) Millennial Lithium Corp.
Millennial Lithium is an exploration stage company and is also listed on the TSX Venture Exchange. The company’s flagship properties, the Pastos Grandes Project and the Cauchari East Project are located in Argentina.
As we move through this list of lithium stocks, you’ll notice that most flagship properties are in this South American Country.
Both of its flagship properties are 100% owned by Millennial Lithium. Pastos Grades is considered an advanced stage project with an expected mine life of 25 years. Construction is expected to start in the third quarter of 2019.
As mentioned above, China has been making significant investments in the lithium sector. Millennial Lithium has been on the receiving end of these fund inflows through China’s GCL group. As such, it is well capitalized to build out existing projects, which could boost the stocks value.
4) Advantage Lithium Corp
We skirted the requirements for a $100 million-dollar market cap requirement for our stocks with Advantage Lithium. The company currently has a market cap of $93 million but was a $100+ million market cap stock earlier this year. Given the recent lithium sector weakness, the stocks price only recently dropped below this threshold.
Advantage Lithium has stakes in five assets spread out over the United States and Argentina. The most notable of which is its 25% stake in the Cauchari project. The project is a JV with Orocobre Limited, the only revenue generating company on our list. Of note, Orocobre owns a 33% stake in Advantage Lithium.
The flagship project is in the Jujuy Province of Argentina and is comprised of 280,000 hectares of land. Most notably, it is only 10 kilometers from Orocobre’s LCE production plant.
The JV is currently on track to complete its drilling program by the end of 2019. The project is years away from completely and Advantage Lithium is a long-term play. Based on its partnership with Orocobre, its possible that Advantage is a buyout candidate down the line.
3) Lithium Americas Corp.
Number 3 on our list of the best lithium stocks for 2019 is Lithium Americas. Lithium Americas is a mid-stage exploration and development mining company. It’s currently developing two flagship properties; the Cauchari-Olaroz, located in Argentina, and the Thacker Pass Project, located in Nevada.
The company formed a 50/50 joint venture (JV) with the world’s second largest lithium producer, Sociedad Quimica y Minera de Chile (SQM). More recently however, a series of deals has changed the ownership structure. SQM is out and Chinese lithium company Jiangxi Ganfeng Lithium Co now owns a 37.5% stake in the JV (Minera Exar). Lithium of Americas increased its position to 62.5% from 50%.
Miera Exar will build and operate the Cauchari-Olaroz Project. Having the backing of the Chinese company increases the likelihood of the project’s success, and possibly the stocks price.
The company also announced that initial production from Cauchari-Olaroz remains on track for 2020 and the mine is projected to have a 40-year mine life.
2) Nemaska Lithium Inc.
The runner up on our lithium stocks list is Nemaski. Nemaska Lithium is an exploration and evaluation company with the bulk of its properties located in the Province of Quebec. Its flagship property is the Whabouchi mine, one of North America’s largest lithium deposits.
The Whabouchi mine is vertically integrated with the Electrochemical Plant in Shawinigan. As a result, it is expected to become one of the lowest cost lithium producing mines in the world. The mine is fully funded for the next year and is expected to enter commercial production of spodumene concentrate in the third quarter of 2019. During its most recent corporate update, the company announced the project remains on track and on budget.
The company operates in Canada, which is a safe mining jurisdiction. This alone increases the stocks attractiveness. Nemaska is backed by the Government of Quebec which owns 12.5% of the company. The Feds have also supported Nemaska’s projects and both levels of government have a vested interest in ensuring the company is successful.
1) Orocobre Limited
Out of all lithium stocks on the TSX, Orocobre comes out on top. One of the largest Lithium stocks on the TSX, Orocobre Limited is a late-stage development and one of the only true production companies on this list.
It has a market capitalization of $987 million and the company’s flagship property, the Salar de Olaroz in Argentina, is a low-cost and high-margin mine. Orocobre also intends to complete its Olaroz expansion in 2019.
What is particularly exciting about the company is that one of the world’s leading automotive companies has taken an interest. Toyota Tsusho (TTC), the strategic arm of Toyata Motors recently took a 15% stake in the company.
Orocobre also has another exciting funded project in Japan in which it is partners with TTC. The company expects that the new 10,000 tpa lithium hydroxide plant is expected to go into operation by the end of 2019.