FTSE lithium stocks have struggled over the past year, in part due to the sharp drop in the price of the metal. The Atlantic Lithium (LSE:ALL) share price was down 7% in early trading this morning (10 July), compounding the 20% loss over the past year. It has been a similar story for Kodal Minerals (LSE:KOD) shares. However, here’s why these growth stocks could be due a comeback.
Well positioned in Ghana
The drop today in the Atlantic Lithium share price can be put down to the news release that a member of the workforce was fatally injured in an incident while working at the Ewoyaa Lithium project. This is sad news, but I don’t see this as a driver for the stock going forward unless further reports come out that suggest there’s a widespread problem with safety.
Despite the fall in the share price over the past year, I think the future looks bright. Late last year, the firm was granted the mining lease for the Ewoyaa Lithium project in Ghana. The business commented that it’s “one of the lowest capital and operating cost hard rock lithium projects globally”. In other words, it’s expected to not cost a lot, but on the flipside be very profitable. This bodes very well.
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The half-year report that came out in March showed that finances are also stable. This is usually a large risk for similar exploration and mining companies. It had $11.4m of cash on hand at the end of the period. Further, with it being listed on the Ghana Stock Exchange, it should be able to raise fresh capital in the future if needed.
A key risk remains the lithium price. Any lithium successfully extracted can only be sold at the going market rate. Therefore, if the price keeps falling, revenue will be lower.
Exploring both lithium and gold
The second company in focus is Kodal Minerals. Thanks to a strong recovery rally in the past few months, the stock is only down 3% over the past year. However, back in February the stock was down over 50% from the summer of 2023.
Kodal focuses on mining and exploration for both lithium and gold. This is why I like the stock, as it’s a slightly lower risk lithium play. Over the past year, the rally in the gold price has helped the share to move higher, particularly earlier this year.
Yet lithium is a key focus, with the Bougouni Lithium project. Drilling programmes have revealed several high-grade lithium pegmatite veins, which bodes well for commercial success. It has also secured funding from other partnerships. This should make it less likely to go bust from a lack of cash.
A risk is any delay that would cause investors to be disappointed. At the moment, the project is forecasted to produce lithium in Q4. Any pushback on this to next year could see the share price fall.
Long-term demand
I believe that the role of lithium in batteries for electric vehicles means that demand is going to increase in coming years. This should act to support the lithium price, along with boosting the prospects for lithium-related stocks. I’ve got both ideas on my watchlist to monitor in coming months, ready to buy.
