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Given the commercial uses of lithium, the demand for lithium-related stocks has been growing in recent years. Although stocks in this area have gone up in value when I look at long-term performance, there are still some stocks that I think are very good value. As I consider what this sector could be worth in the next decade, here are some ideas I like that I’m considering.
A fully funded mining project
Kodal Minerals (LSE:KOD) is a project-focused lithium exploration and development company in West Africa. The stock price has risen 34% in the past year.
It came to my attention recently due to securing $117.5 million in funding from a Chinese company. With $65 million allocated to the flagship Bougouni lithium project, it means the costs are covered. This eliminates a key risk for many exploration projects, which is that the money may run out before it is complete.
There is still an obvious risk that lithium cannot be viably extracted from the project for some unknown reason.
But I think the stock is a bargain because the market capitalization is only £63m today. Projected life of mine revenue is £1.62 billion!
An ESG positive competitor
Another UK listed lithium company is clean tech lithium (LSE:CTL). It’s a small company like Kodal, with a market capitalization of £62m. The stock price has risen 52% over the last year.
It currently has three projects underway in Chile, which is seen as a good source of lithium for the future. It also attracts ESG investors, as it says it plans to “to be the greenest lithium supplier for the electric vehicle market”.
Net zero commitments are great, but if the company can’t monetize the projects, it won’t do much good. Another concern I have is that the four largest shareholders alone own almost 39% of the total shares.
I think there’s value here when you compare the current size of the company to the net present value of some of the projects. For example, the value of Laguna Verde is estimated to be in the billions alone. If one takes off, there is headroom for the stock to outperform.
taking advantage of a fall
Finally, one hot lithium stock that is getting attention right now is atlantic lithium (LSE:ALL). Some would say it’s a bargain, down 48% from last year. Most of this drop came recently due to a negative short seller report critical of the company.
I feel there is not much basis for some of the accusations and that the stock price should unwind them in the coming months and years.
The company’s flagship project is Ghana’s first lithium-producing mine, which has good potential. One report I saw estimated life of mine revenue at £3.9bn. Of course, there are many hurdles to overcome before the cash arrives, but it has certainly caught my attention.
Given the high risk nature of these types of stocks, I am looking forward to investing, but will only do so with a small amount of money.
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