With demand for alternative energy sources and materials to store such energy increasing, I see opportunity. Indeed, some renewable energy stocks have done very well in recent years – and I expect there will be big winners in years to come, as well.
As lithium demand grows, here are three London-listed companies that I think could benefit.
Atlantic Lithium
Shares in Atlantic Lithium (LSE: ALL) have tumbled 29% over the past 12 months. On a five-year timeframe they have moved up, but only by 9%.
The shares dropped sharply this month after an online report cast doubt on the prospects of its lithium mine in Ghana. Atlantic said that it “outrightly refutes the allegations of impropriety made by the Report”. However, the shares remain significantly lower than they were at the start of month.
The company announced today that drilling has started at its key Ewoyaa project in Ghana. If that project lives up to its potential, it could mean that Atlantic becomes a significant lithium producer. That might mean its shares surge.
Kodal Minerals
Currently there is an imbalance of supply and demand in the lithium market.
That has meant more miners trying to bring lithium projects on-line. But while supply is set to increase, so too is demand. So I think lithium mining could keep growing, potentially boosting the price of renewable energy stocks like Kodal Minerals (LSE: KOD). The company’s flagship project in west Africa is sizeable and has attracted recent investment from a large Chinese miner.
That helps explain why Kodal shares have added more than 50% in value so far in 2023.
The company has other projects in its portfolio and the Chinese investment could help it develop them. Again, a sharply higher lithium price could help Kodal shares move up strongly, depending on how successfully it puts into operation and commercialises its projects.
I like the prospects of Kodal’s key mine. But I see a risk in the company’s valuation being so tied to a single asset that has not entered commercial production and is in a volatile country.
Rio Tinto
Mining giant Rio Tinto (LSE: RIO) is involved in pulling a wide range of minerals from the earth – including lithium.
That means that it might benefit from surging demand for lithium from battery makers. It has the mining, marketing and distribution muscle to commercialise its lithium assets at scale.
The diversified nature of the established giant’s portfolio means that even a surging lithium price might have only limited benefit for the Rio Tinto share price. But if the bottom suddenly falls out of the lithium market, Rio’s overall business could still do quite well.
Should I buy?
These renewable energy stocks might do very well. So do I plan to buy them for my portfolio?
No, I do not.
Atlantic and Kodal both remain unproven when it comes to large-scale commercial production. They are both heavily reliant on a key project. That business profile does not match my risk tolerance.
By contrast, I like Rio’s wider, diversified portfolio of projects. But for now, I think the global metal pricing cycle could fall further, hurting profits at the firm. So I am watching the shares, but have no plans to buy them at the moment.
