Lithium Stocks Positioned to Rise as Petroleum Woes Continue

It’s hard to see the forest through the trees. The Keystone XL pipeline cancellation and SEC investigation into ExxonMobil aren’t outlying issues in an otherwise stable market. Oil is in trouble. Anyone who’s been paying attention in the last few years can see that.

What’s next? I’ve been asking that question for thirty years. When I get the answer right, I make money in the market. When I’m wrong, I take losses. This one is a no-brainer. EVs are going to replace gas-powered automobiles. How do I turn that into capital gains?

It’s time to invest heavy in Lithium. It’s the key to making batteries for electric vehicles. There’s only one known source for it in the United States. It’s in Clayton Valley, Nevada, owned by Cypress Development Corp (CYDVF). Put them on your watch list today.

Death Valley May Bring Life to US Lithium Production

Clayton Valley isn’t far from Death Valley National Park, land that’s protected by the US government and defended fiercely by environmental advocates. Panamint Valley, which is partially located inside the park boundaries, is another potential source for lithium.

The “White Gold Rush” is coming. Under the Trump administration, the Bureau of Land Management (BLM) authorized Battery Minerals Resources California Inc. (BMR) to drill in Panamint with the intent of finding lithium deposits.

Drilling on environmentally protected land? How is that possible? Trump used the Defense Production Act (DPA) to authorize it, claiming that lithium was critical to America’s long-term economic security. It’s not clear yet whether the new administration will allow it to continue.

Lithium Mining and Exploration in South America

The Mojave Desert is widely projected to be the most viable source of lithium in the United States, one that we’ll have to tap into at some point, but don’t hold your breath waiting. Today’s lithium investor needs to look elsewhere. My gaze is fixed on South America.

As of this writing, 80% of the world’s lithium reserves are in Bolivia. It can also be found in Argentina and Chile, making those three countries the “ABC” of lithium mining. If you want exposure to all of them, buy the Global X Lithium ETF (LIT).

You might also want to check out Sociedad Quimica y Minera (SQM). It hit $60 recently and then dropped down to $53, a good price to buy. Their Salar de Atacama lithium operation is cost effective and the company is diversified with a solid foothold in the fertilizer market.

Livent Corp (LTHM) is a US-based company with manufacturing facilities in Argentina. They also have facilities in the US, China, India, and the UK. They peaked two weeks ago at $23 and have since dropped to $19. See the pattern? Buy them now.

The Tesla/Piedmont Marriage. Will it work?

One lithium stock that has not experienced a recent drop is Piedmont Lithium (PLL). They were at $19 in October and opening the market this morning at $60. Personally, I think they’re overbought, but you might get some short-term traction out of them.

Here’s the deal. Piedmont signed an agreement with Tesla (TSLA) last year to start supplying them lithium in 2022. That’s a monster contract, but can they actually fulfill it? Piedmont is still in the process of building a US-based lithium mine. It’s not done yet.

Every tool I have is telling me to expect a downtrend on Piedmont. Common sense tells me there’s always setbacks during the building process. I believe this North Carolina company will be successful, but I’m not buying right now. I’ll wait six months for a better price.

The Environmental Opposition to Lithium Mining

Put your charts and graphs away for a moment and think about our current situation. The new administration has promised a focus on renewable energy and cutting back on greenhouse gas emissions. Shifting to electric vehicles is a key step in achieving either of those.

Remember the “forest through the trees” analogy? Environmentalists agree that electric cars are better for the environment, but many of them are also opposed to lithium mining, which pollutes water and uses toxic chemicals in the extraction process.

Scientists in Chile claim that lithium mining is destroying the local environment of the Altacama desert. Do you think Californians will allow that to happen in the Mojave? Switching to lithium-ion powered EVs will require resources from elsewhere, namely South America.

Big Oil may be under fire, but it’s still our best shot at short-term energy independence. ExxonMobil took a hit last week. I’m grateful for it. The price came down. I bought another block of it. I also bought lithium and EV stocks, but only with money I can afford to lose.

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About the Author

Lithium Stocks Positioned to Rise as Petroleum Woes Continue

Kevin Flynn

A former financial professional and founder of AdvisorScale Financial Writing, Kevin lives in Leominster, Massachusetts with his wife Evelyn, two cats, and nine wonderful grandchildren.