Is Now a Good Time to Buy Lithium Stocks?

What factors should lithium investors consider in today’s market?

For Berry, cutting through the noise in the current environment is incredibly difficult. “That’s because if we're sitting here today, and the lithium spot price is, let's say US$41,000 to US$42,000, and contract prices are generally higher, when you think about those numbers and then you look at the entire lithium cost curve, literally every single project is economic,” he said. “So what you have to do is you have to weigh the distinct risks, the non-economic risks for specific projects.”

For his part, Hooper said investors still need to be very cognizant of global macro factors. “We get a little bit of a myopic view of our sector," he said, "and we've seen different headwinds — inflation, the Russia-Ukraine war, possible recession and so on — actually affect the lithium market when the fundamentals within the market have looked to be sound.”

He added that it is important to remember that lithium is not a commodity, but a specialty chemical.

“I think investors would do well to take money off the table when they've had substantial returns and look to reenter when shares have been beaten down,” he said. “I think to ‘buy and hold’ you need to be brave. It's not to say you shouldn't, it's just that there are buying and selling opportunities given the world that we live in.”

For Howard Klein, Hooper's partner at RK Equity, the lithium market is a stock-picking market right now.

“The equity market sentiment is very correlated to where the lithium spot carbonate price is, which has now recovered and it is stabilizing,” he told INN. “Quite soon you're going to see sustained lithium price rises and then people are going to pile back into lithium equities. But I think it's important to be selective.”

Joe Lowry of Global Lithium also shared insight on how to cut through the noise when it comes to investing in lithium companies.

“I think the red flags are really, if you learn how to analyze this business, you see in the prefeasibility studies there's always more optimism than is warranted. It's endemic to the industry,” he said. “You need to look at the milestones and see when the first milestone slips; then you start looking at the next one and the next one.”

When it comes to investing in lithium stocks, Lowry said investors have to have the strength of their convictions.

“But I also think you have to adjust your thinking for circumstances,” he said. “Don't get married to prejudices or assumptions that you have — be flexible and always go for quality.”

How to evaluate lithium projects?

Selecting companies with the right management team is key in lithium, but having an understanding of the assets a company holds and intends to develop is also essential, Paola Rojas of Synergy Resource Capital told INN last year.

When asked about how she chooses lithium projects, Rojas said she prefers brine projects due to her experience, but she is also interested in hard-rock assets.

Aside from type of deposit, she looks at grades above 500 milligrams per liter in brine with low impurities, and 1 percent in spodumene ore, ideally with known deposits in the vicinity.

“Going a step further, even when early, is important to understand what management’s preliminary plans for extraction are,” Rojas said. “Although evaporation ponds have been a workhorse and are commonly used, I’m excited to see what direct lithium extraction (DLE) can bring.”

There are some deal breakers for Rojas when assessing lithium projects.

“I prefer to stay away from low grades — although new technologies will close the gap soon, I believe, and there are alternatives such as resins and DLE variants, which potentially can make a big difference there, so I’m keeping an eye,” she said.

She also avoids OTC listings, and in terms of jurisdictions, Rojas said she stays away from anything outside of Australia, Argentina, Chile, Brazil, the US and Canada.