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5 Best Lithium Stocks In Canada (Jul 2024)

Best Lithium Stocks In Canada

5 Best Lithium Stocks In Canada (Jul 2024)

If you hear the investment advice “consider investing in metals,” lithium isn’t going to be the first name that pops up in your head. It might not even be the fourth one.

Precious metals are the first that come to mind, primarily gold and silver (sometimes platinum). Steel is another conclusion you might jump to before thinking of lithium.

But even if it’s not your first choice, lithium should be considered, and not just to gain exposure to metals. The best lithium stocks in Canada can be a great way to diversify your portfolio.

Lithium As An Investment

The most common use of lithium is in rechargeable batteries, which has made it one of the most coveted metals in today’s electronics-focused world. Almost all the batteries used in electronic devices, like cellphones, laptops, tablets, etc., are lithium-ion.

Since they are lightweight and offer the best energy density, most electric vehicles (EVs) around the globe use lithium-ion batteries. And the final and even more impressive presence of EVs is in the power grid.

Renewable energy sources like solar and wind need to use batteries to ensure that steady power is delivered to the end-user. The grid was about 85.6% lithium-ion batteries in 2015, which grew to about 90% in 2019.

The latest numbers aren’t in yet, but it’s expected that over 90% of the global grid battery market is controlled by lithium-ion batteries.

From an investment perspective, lithium is a metal-based commodity, and its price grew by about 323% between 2020 and 2021. And since both the EV market and the renewable market are far away from saturation, lithium’s demand might keep growing.

Best Lithium Stocks In Canada

There are a decent number of lithium stocks in Canada, and the pool gets even bigger if you start adding US-based securities into the mix as well, which I’ve done below:

  • Allkem (AKE.TO)
  • Sigma Lithium (SGML.V)
  • Lithium Americas (LAC.TO)
  • Lithium Royalty (LIRC.TO)
  • Patriot Battery Metals (PMET.V)

1. Allkem

Allkem Logo
  • Ticker: AKE.TO
  • Forward Dividend Yield: N/A
  • Upcoming Dividend Date: Jul 11, 2024
  • Market Cap: $0

Allkem is one of the largest lithium producers in the world and is expected to become significantly larger when its merger with Livent goes through. The company is committed to maintaining a market share of at least 10%.

It has two projects in the operational stage, one in Australia and the other in Argentina, the first and fourth largest lithium-producing companies (Respectively).

The two running projects also represent two major lithium extraction methods – hard rock lithium processing (Australia) and lithium brine recovery (Argentina). Two more (one brine, one solid rock) projects are expected to come online in the future, along with a battery-grade lithium project in Japan.

Allkem has a compelling geographic presence and a solid portfolio of assets. It’s also a financially sound company with revenues steadily growing year after year, healthy operating income, and manageable debt.

It’s a mature lithium business ready to thrive alongside the EV and broader battery industry.

The stock has experienced multiple growth phases over the years, most recently during the post-pandemic bullish phase.

But it has never been a consistent grower, though it may change after its merger with Livent. It’s modestly overvalued, but that doesn’t make it an unsafe pick. 

2. Sigma Lithium

Sigma Lithium Stock
  • Ticker: SGML.V
  • Forward Dividend Yield: N/A
  • Upcoming Dividend Date: Jun 22, 2018
  • Market Cap: $1.87 Billion

Sigma Lithium is emerging as one of the most sustainable lithium producers in the world.

It has the first lithium plant in the world that produces chemical-grade lithium that doesn’t use the tailing dam to store the contaminated water used in the lithium extraction process.

These tailing dams are a major health and environmental hazard, and by recycling 100% of the process water, Sigma is producing one of the cleanest and greenest versions of lithium in the world.

Two other business model strengths of the company are its low-cost production and proximity to ports, lowering transportation costs.

The company is currently averaging about US$ 523 per ton of lithium, including the cost of insurance and freight (CIF). This is significantly lower, even if we compare it to Allkem’s Sales price of US$4,297 per dry metric ton(s) (CIF).

Financially, Sigma is still a speculative investment. It hasn’t started generating an income yet and already has a debt of about $136 million. But it also has about $45 million in cash and investments.

The best part of Sigma as an investment, i.e., its performance, is also tied to its most dangerous aspect – overvaluation.

In the four years between Oct 2019 and Oct 2023, the stock rose by about 2,000%. But this rise also inflated its price-to-book to a dangerously high level of 25.

Realistically, Sigma Lithium has already capitalized on its strengths. The momentum it has (so far) rode on may change course if its first few earnings reports are not as promising as expected.

But if it delivers financially and sets the right tone for its earnings-based valuation metrics, the stock may thrive, even beyond what it’s already done. Its 3.3% insider ownership is promising as well.

3. Lithium Americas

Lithium Americas Stock
  • Ticker: LAC.TO
  • Forward Dividend Yield: N/A
  • Upcoming Dividend Date: Nov 08, 2017
  • Market Cap: $786.16 Million

Lithium Americas operated in two regions – Argentina and America, but the company has now separated into two publicly traded entities, each one representing one area of operation.

The LAC ticker now represents the American business – Thacker Pass in Nevada. Construction started on this project early this year. 

Thacker Pass reserves have a significantly long life – 40 years at a nameplate capacity of 40 kiloton battery-quality lithium carbonate.

The capacity is expanded to double when Phase 2 is complete (no timeline given). The company plans to become an important player in the North American EV supply chain.

This claim is endorsed by its partnership with GM, which gives the vehicle manufacturer exclusive rights to Thacker Pass output for ten years.

GM is the fourth-largest global and 2nd largest American EV manufacturer, and a partnership with GM can prove quite powerful for Lithium Americas.

The company has a decent level of insider ownership – 7.9% and about 40% is owned by private companies, public companies, and institutions. The stock price so far has followed the lithium price patterns.

The stock may be less risky than others on this list, but be on the lookout for delays in production timeline or the company falling short of estimated production numbers.

4. Lithium Royalty

  • Ticker: LIRC.TO
  • Forward Dividend Yield: N/A
  • Upcoming Dividend Date: Jul 11, 2024
  • Market Cap: $380.70 Million

Lithium Royalty offers you a geographically diverse and relatively “shielded” exposure to the underlying asset, i.e., lithium.

However, the company is too new to determine whether this edge would allow the stock to mimic the performance of Franco Nevada in the gold sector.

The company has developed a decent portfolio – 32 royalties in 7 countries. Just three of the royalties are in the production stage companies, and another three are in the construction stage, i.e., expected to enter the production phase in the near future. The rest are in the exploration and development stage of companies.

Hard rock mining operations dominate the portfolio, though there are a few brine ones as well. The bulk of the royalty contracts are in Canada, followed by Australia.

Lithium Royalty can be a promising investment. As a royalty company, it may not be as vulnerable to lithium price fluctuations as lithium producers, especially when so much of its portfolio is in the development stage.

But it’s well-positioned to ride the wave of optimism if lithium demand and prices spike.

Lithium Royalty is a new stock, and so far, it has simply fallen. It’s also quite overvalued, and over 50% of the company is owned by hedge funds. But it has no debt and a strong portfolio.

5. Patriot Battery Metals

  • Ticker: PMET.V
  • Forward Dividend Yield: N/A
  • Upcoming Dividend Date: Jul 11, 2024
  • Market Cap: $0

Patriot Battery Metals is one of the most speculative prospects on this list. It’s an exploration stage company with a hundred percent ownership of a Quebec-based project, which gives it access to the largest lithium pegmatite deposit resource in the Americas and the eighth largest in the world (hard rock lithium).

By current estimates, the company will not start the mining operations by 2028.

Despite this significant operational delay, the reason you may want to consider this Lithium stock is the inherent strengths it offers – Local mining operations ideally positioned to take advantage of a North American EV manufacturing boom and access to world-class, long-life reserves.

The downside of investing in such a long-term prospect is the uncertainty of the market. A major shift in battery technology or even more traction in hydrogen-fueled Zero-Emission Vehicles can push lithium demand and value down.

On the other hand, rising lithium demand can push even future producers to new heights. The stock has already gone up over 300% between its inception (July 2022) and Oct 2023.   

The stock has virtually no debt and a decent amount of cash and investments, which may be enough to fund the exploration activities.

Still, the primary forces that would decide the fate of this stock would be market dynamics and lithium demand.

Micro-Cap and Nano-Cap Lithium Stocks to Consider

If you have an adequate risk tolerance, there are a few micro-cap and nano-cap stocks you might consider keeping an eye on.

CompanyExchangeSymbol
Cypress DevelopmentTSXVCYP
Wealth MineralsTSXVWML
Alpha LithiumTSXVALLI
Vision LithiumTSXVVLI
Argentina Lithium & EnergyTSXVLIT
QMC Quantum MineralsTSXVQMC

Is There Any Lithium In Canada?

Yes. A lot of it, actually. Canada is home to about 4% of the world’s known lithium reserves, and the country has cracked the top six. While many Canada-based lithium companies have mines in foreign countries, the home-based untapped reserves can give the country a major advantage in the still-growing EV market.

Is Lithium A Good Investment?

The answer is a bit more complicated than a simple surge in supply and Lithium’s potential importance in a “greener” world. According to SPB Global, companies around the world acquired (collectively) around 6.8 million tonnes of lithium in 2020.

This number is much higher than the demand projections (per year) for as far as 2020, but it’s a good baseline. Chinese companies alone acquired about 6.4 million tonnes in 2021 (so far). That’s about 7.4% of the total known reserves of lithium (about 86 million tonnes).

And that’s just the reserves. The developed mines and the total output is significantly less. That makes lithium a great investment with aggressively growing demand and relatively limited supply.

But there is a flip side to it as well. Some projections indicate that supply can outpace demand by as soon as 2025. And that’s with the known reserves.

If more dark horses like Afghanistan, which is rumoured to have enough lithium reserves to put it among the top three most lithium-rich countries in the world, enter the race, the price of the metal might take a serious plunge before normalizing to match the demand.

A technological upheaval, like a breakthrough in lithium-ion alternatives, can also cause the global lithium demand to plunge. This can potentially have many disastrous consequences for lithium as an investment asset, then a supply glut.

In conclusion, lithium is potentially a good investment for now, but like many other investments, it has its risks.

Conclusion

Lithium is a sought-after asset right now, and the chances of its demand going down anytime soon seem quite slim.

However, a market flooded with too much lithium or a better alternative emerging to capture the battery market can cause the lithium market to drop precipitously.

Keep the strengths and weaknesses of the underlying asset and the commodity market in mind before making an investment in any of the best lithium stocks in Canada.

Don’t want to pick your own lithium stocks? Consider buying lithium ETFs instead.

One thought on “5 Best Lithium Stocks In Canada (Jul 2024)

  1. Since last month, I have been thinking about starting a business, but I didn’t find any suitable. I never thought about investing in lithium stock because I don’t know much about that. In your blog, You have written many essential things about lithium & I am excited about it. I can invest a little money in lithium stock to check profit for the first time. Thanks for sharing your ideas here.

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