Lithium is an elemental metal that soared in popularity since the start of 2021. It is primarily used to manufacture batteries for electric vehicles. The price of lithium rose by 800% in 2021, and it continues to gain pace year to date.
Due to soaring demand from the EV segment as well as energy storage, the price for lithium is poised to gain momentum in the next decade. The Infrastructure Investment and Jobs Act in the U.S. has already allocated US$5 billion in funding, which will be deployed to create a robust network of EV charging stations.
There is a good chance that EVs will account for 50% of total auto sales by 2030. Several legacy auto manufacturers are also entering this highly disruptive sector, which suggests there will be ample demand for lithium in 2022 and beyond.
Keeping these factors in mind, let’s see the top two lithium mining stocks you can buy today.
One of the world’s largest suppliers of lithium, Albemarle (NYSE:ALB) is valued at a market cap of US$26 billion. The stock has gained 128% in the last five years and is up 55% since April 2021.
The company’s sales ranged between US$3.12 billion and US$3.58 billion in the last four years. Analysts expect revenue to increase by 31.6% to US$4.38 billion in 2022 and by 19% to US$5.21 billion in 2023. Comparatively, adjusted earnings are forecast to more than double from $4.04 in 2021 to $8.57 in 2022.
However, Albemarle remains unprofitable on a GAAP basis and is burning cash hand over fist. In 2021, its negative free cash flow widened to US$609.5 million compared to US$51.6 million in 2020. The company’s management forecasts negative cash flow to range between US$800 million and US$1.1 billion in 2022.
Albemarle ended 2021 with a cash balance of US$439 million and US$2.55 billion in debt providing it with short-term liquidity. Despite its stellar gains, analysts expect the stock to gain another 10% in the next 12 months.
Lithium Americas (TSX:LAC)(NYSE:LAC) is valued at US$4.94 billion by market cap. A pre-revenue company until now, Lithium Americas is forecast to report sales of US$47 million in 2022. Its top line is expected to surge to US$240 million in 2023.
The rapid revenue expansion will allow Lithium Americas to improve profit margins at a healthy rate. Its earnings are forecast to increase to US$0.5 per share in 2023 compared to a loss per share of US$0.32 in 2021.
Lithium Americas is constructing extraction sites in Argentina. One of the company’s most promising assets is the Thacker Pass lithium project, which reportedly has the largest known lithium deposits in the world. It’s also conducting a feasibility study at a site in Nevada.
Earlier this week, Bloomberg reported U.S. president Joe Biden might invoke the DPA (Defense Production Act) of 1950 “to encourage domestic production of critical minerals for electric-vehicle and other types of batteries.”
The DPA will permit the government to subsidize the production of metals and minerals including lithium. Shares of Lithium Americas are already up 154% in the last year and have gained 820% since April 2017.