July 20th, 2022 | 13:12 CEST
Where is the next 749% lurking? Volkswagen, Edison Lithium, Rock Tech Lithium
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"[...] In 2020, the die is finally cast in the automotive industry towards electromobility. [...]" Dirk Harbecke, Executive Chairman, Rock Tech Lithium Inc.
At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.
Volkswagen: Good market position
Volkswagen is a big player worldwide when it comes to passenger cars. After the diesel scandal in 2015, however, the Wolfsburg group was quickly seen as a discontinued model - observers found it too dirty and old-fashioned. But the crisis was a shot across the bow for Volkswagen at just the right time. Today, the group is considered a serious manufacturer of e-cars. The ID.3, for example, is a model that is hard to imagine German roads without. But if you need a lot of electric cars, you also need lithium. Rising prices for the "white gold" are also putting pressure on carmakers - after all, margins fall when raw materials become more expensive.
Many automakers, such as BYD have long invested in lithium deposits. Volkswagen also entered into a cooperation agreement with the Vulcan Group years ago in order to secure CO2-free lithium from Germany. A few days ago, the lithium company Rock Tech Lithium also announced the conclusion of a framework agreement for the supply of lithium hydroxide with an as yet unnamed car manufacturer from Germany. Who is it? Unclear! The fact is that all German car manufacturers would do well to secure large quantities of the coveted material as early and as cheaply as possible.
Edison Lithium: Good start, low valuation
When the lithium market is in turmoil, smaller companies usually benefit directly. Especially in a friendly market environment, it usually does not take long for resourceful investors to discover the second and third tiers for themselves. And today? Companies like Edison Lithium are trading near their all-time lows on the stock market. Yet Edison Lithium operates in Argentina only about 20 km from the country's largest lithium producer, Livent, where it has two exploration licenses.
A few months ago, Edison Lithium divested its cobalt activities in Canada and is now fully focused on "white gold". In South America, a reorientation is currently taking place. Many investors are more critical of Chile after some rigorous laws and are focusing on Argentina or even the emerging Bolivia. Since Edison Lithium paid only about USD 1.85 million for its lithium activities and is now valued at only about EUR 6 million, the stock could become the market focus given the general lithium hype. While Edison is an early-stage explorer, this can also be an opportunity: There is no need to struggle with the adversities of the operating business yet. The only thing that counts is the perspective, which could become much clearer in the coming months. If you think speculatively, make a note of this value.
Rock Tech Lithium: This is the way to go!
Where the journey can go for small lithium companies is also shown by the share price performance of the already mentioned company Rock Tech Lithium. The German-Canadian company focuses on sustainable mining in Canada and processing in Germany. In the meantime, a lithium hydroxide factory in Guben is already planned. There are also numerous cooperations with industry representatives, such as ThyssenKrupp Materials. The share has risen significantly since its early days. Over a period of three years, the return on investment is a whopping 749%. Therefore, Rock Tech Lithium is an example of the lithium rush of the past years.
Investors who want to invest in lithium have a variety of options: Car manufacturers that have already secured deposits are a relatively conservative option. Examples are BYD and Volkswagen. Growth stocks such as Rock Tech Lithium are more speculative. Although no significant sales are made here yet, Rock Tech Lithium already has a foot in the door and is well-positioned thanks to various cooperations. The downside is the already ambitious valuation. In contrast, stocks like Edison Lithium look "dirt cheap". Here, not so much has happened operationally yet, but further exploration results could make the overall picture much clearer.
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