Lithium is becoming increasingly important as more of the world aims to transition to net zero. As such, many investors are now seeking exposure to lithium stocks. What exactly are the uses for lithium? And which stocks are at the forefront of the industry? I think I’ve found two companies engaged in lithium exploration that will be good additions to my long-term portfolio. Why do these firms seem attractive? Let’s take a closer look.
What is lithium and why is it needed?
Lithium is the least dense metal that has been discovered in the world. It is primarily found in Australia, China, Chile, and Argentina.
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Like many other metals, such as silver and copper, lithium has a multitude of applications. It has uses in lubricating greases and also in optics.
Its biggest use, and the reason for heightened interest in the metal, is in batteries for electric vehicles (EVs) and mobile phones.
Therefore, as a number of businesses pursue EVs, like Tesla and NIO, the demand for lithium is likely to increase.
The first company that interests me is Alpha Lithium (TSXV:ALLI). This is a Canada-based exploration firm. It has a 100% interest in 27,500 hectares in the ‘Lithium Triangle’ between Argentina, Bolivia, and Chile.
In February, wealth management business Echelon Wealth Partners commented on the “substantial foothold” that Alpha has in such a lucrative geographic area.
Classifying the company as a ‘speculative buy’, Echelon placed a C$$1.80 price target on this stock. It currently trades at C$$1, up 25% in the past year.
Furthermore, given this price target and the size of its exploration area, I think there could be great upside potential here.
As with any exploration company, however, there is no guarantee that anything fruitful will come from the zone.
The second business is Australia-based miner Atlantic Lithium (LSE:ALL). This company operates across Ghana and the Ivory Coast. It currently trades at 61.6p.
Its flagship mining project is the Ewoyaa Project in Ghana. For the six months to 31 December 2021, the mineral reserve estimate at Ewoyaa increased 42% year on year. The estimate is now 30.1 metric tonnes.
The business also recently entered into an agreement with lithium hydroxide producer Piedmont Lithium. This will bring the Ewoyaa Project through to the production stage.
In addition, the company gained a licence to explore an additional 140 square kilometres of land in Ghana.
The company has a cash position that has improved from A$1.5m to A$23.3m from 2020 to 2021. Like Alpha, however, Atlantic carries the risk that its exploration activities may yield nothing profitable.
Overall, the increased demand for lithium worldwide has convinced me to gain exposure to the metal. These two companies are expanding and engaging in exciting exploration projects. While they are speculative, I think they could be good additions to my portfolio. I will be buying shares in both firms soon.