Macroeconomic Themes ~ Lithium Stock Picks - November 2021

Our Equities Trader, Joseph Raad, discusses macroeconomic themes for the month of November.

The last two years have seen the prices of many resources ebb and flow in accordance with unprecedented market conditions. While there have been resurgences of quite a few resources, none have rivalled that of lithium. The global clean energy push saw the demand for the metal skyrocket as of mid-2020, and investors alike are strongly anticipating a continued rally.

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With many countries adopting a net-zero emissions target over the next few decades, lithium batteries are being utilised and implemented in a range of motor vehicles. Being a relatively abundant resource, a June report by BNEF estimates that the current global reserves of the metal of 21 million tonnes (according to the US Geological Survey), are enough to support the conversion to electric vehicles (EVs) through to the mid-century. In August, Joe Biden stated that the US seeks to make half of its new auto fleet electric by 2030. Similarly, from a more homegrown perspective, the NSW Electric Vehicle Strategy, implemented by the NSW government, intends to increase EV sales to 52% by 2030-2031. Initiatives as such should see the demand for lithium continue to increase despite the already phenomenal growth over the past couple of years.

 

While many investors look towards the spot price of resources, a good indicator for the demand and performance of lithium companies has been the Global X Lithium & Battery Tech ETF (NYSE.LIT). The ETF’s price pre-COVID crash was sitting at $34. The last 18 months has seen an extraordinary surge, with the ETF currently at $92, an approximate 170% increase. To put this into perspective, the typical average return of an S&P 500 ETF is around 10%.
image (17) The ASX has seen the birth of an array of lithium companies, with some acting as spin-outs from existing businesses and others listing as new entities. Many Aussies believe that Australia has the potential to be a global green energy powerhouse, and the performance of many ASX-listed lithium stocks has demonstrated just that. 
 
 

Stock Picks

 

Lake Resources (ASX:LKE)

lake resources

Lake Resources NL (ASX:LKE; OTC:LLKKF) is a clean lithium developer utilising clean, direct extraction technology for the development of sustainable, high purity lithium from its flagship Kachi Project, as well as three other lithium brine projects in Argentina. The projects cover 200 sq km in a prime location within the Lithium Triangle, where 40% of the world’s lithium is produced at the lowest cost.

 

Arizona Lithium (ASX:AZL)

arizona lithium

Arizona Lithium (ASX:AZL), formerly Hawkstone Mining, recently raised $13 million to support various works at its Big Sandy lithium project in Arizona, USA, which has an indicated and an inferred resource of 32.5 million tonnes at 1850 parts per million (ppm) lithium, representing 320,800 tonnes lithium carbonate equivalent (LCE).

Core Lithium (ASX:CXO)

Core lithium

ASX-listed Core Lithium Ltd (ASX: CXO) is well-positioned to be Australia’s next lithium producer, developing one of Australia’s most capital-efficient and lowest-cost spodumene lithium projects; the Finniss Lithium Project, located near Darwin Port in the Northern Territory, Australia.


 

Summary

 

With a large increase in lithium companies listing, however, it is becoming more vital for investors to seek out projects which are scalable, can produce high-grade lithium, and are looking to sign strong offtake agreements. 

 

Where to from here?

Trading equities is all about having access to the right investment opportunities and making decisions based on accurate, unbiased information. Often, this means hours of research on a daily basis, keeping up with several ASX announcements, understanding economy-impacting events and regularly consuming broader news updates. If you're not an equities trader by profession, then it can quickly become rather overwhelming, especially once you have built a considerable-sized investment portfolio.

Our Equities Trading team, backed by our independent research department is the ideal solution for said situation. Our clients receive access to exclusive investment opportunities, daily ASX research reports, our expert weekly outlook on the Australian markets and direct access to our equity traders.

Trading with Barclay Pearce Capital is about building long-term returns, trust, confidence and a mutually beneficial relationship.

 

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Ben Weber

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Trent Primmer

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Joseph Raad

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Malcolm Kazal

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Morgan McGuire

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Trent Primmer
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