Lithium's down. Opportunity's up. Our top 5 stocks to watch in 2024 (Patriot Battery Metals up first)
Think lithium's dead? We see opportunity. Here's five lithium stocks to watch in 2024, starting with Patriot Battery Metals
You can’t sugarcoat it - Lithium has taken a beating lately. But that's when opportunities arise in cyclical markets.
At Equities Club, we always look for these down cycles, knowing the most potential for big gains lies in the market lows.
The past two years' pullback in lithium prices has set the stage for a rebound. Many analysts have said the bottom is in, and we agree. We only have to look at the projections for lithium by 2030 to realise we are going to need a lot more lithium, and it stands to reason that the price will follow.
We've already covered the largest hard rock lithium deposits on the ASX and why demand is surging, with McKinsey & Co. predicting a massive 33% annual growth in lithium-ion battery demand through 2030.
To butcher a line from Ryan Gosling in The Big Short: “I smell opportunity”.
So while we could take the day off and watch that movie for the 67th time, we took stock of Gosling’s words and took advantage of the opportunity we saw - tirelessly sorting through countless lithium plays on the ASX to uncover our top 5 lithium stocks to watch in 2024.
Put simply, these are smaller players we believe are poised for major leaps this year.
To make this list we focused on the following:
Location
Management experience
Resource size
Speed to market and
Current valuation
Let's jump into the first company:
Patriot Battery Metals has seen its valuation soar from relative minnow to billion-dollar lithium juggernaut – an exploration story almost impossible to rival. PMT is already valued at more than $1 billion and makes our list because it's a strategic asset, not just a project. This means it’s going to be that big that it becomes of international significance to the lithium market.
With an exceptionally experienced management team, substantial investment from lithium powerhouse Albemarle, and a location that lends itself to a growing EV auto industry (more on that below), PMT has the potential to be Pilbara Minerals of North America.
As PMT moves through further drilling, resource expansion, feasibility studies and potential deals, it will continue to attract global interest. Even as the lithium market is pulling back, interest in Patriot continues to grow. It’s a signature of a company that shouldn’t be ignored.
Management = class
With lithium legend Ken Brinsden recently named CEO, PMT has the most capable man globally in charge of their Corvette asset, featured in the video above. For those unfamiliar with Ken, he spearheaded Pilbara Minerals’ rapid rise from explorer to producer at Pilgangoora – now one of the world's leading lithium projects. Pilbara Minerals is now an AUD$12B company, and as Ken recently told Stockhead: “I really want to put Corvette in the category of being one of those mega projects.”
Ken’s track record suggests this isn't just ambition.
Oh, Canada
Nestled in the resource-rich province of Quebec, Canada, Corvette provides strategic advantages. Quebec boasts a globally respected mining industry, a stable regulatory environment, abundant resources, and established infrastructure. A sealed road only 15km away, readily available hydropower, and skilled labour all add to its appeal, as they’re all crucial for successful mining operations.
When Patriot becomes a producing mine, it is set to feed its lithium into the ever-growing North American Lithium market, which current projections show will grow more than tenfold between 2024 and 2030. At the end of 2023, the Biden-Harris Administration announced a $3.5 billion program to expand domestic battery manufacturing and processing.
So where will they be sourcing their lithium from for this program? We have a good idea.
Processing made simple
PMT's choice of Dense Media Separation (DMS) processing for its Corvette project signals their commitment to operational efficiency, environmental stewardship, and cost-savings. DMS processing stands out for its simplicity - unlike more chemically intensive methods of mineral processing, DMS is a predominantly physical process that minimises the use of harmful chemicals and reduces the environmental footprint of mining operations. This cost-effective method delivers significant savings for PMT, eliminating the need for expensive processing infrastructure and minimising chemical costs. This simple processing method positions PMT in a positive light for those wanting to invest in more environmentally friendly mining practices.
Big boys circling
When the CEO of Rio Tinto comes out and says the company “would love” to produce lithium in Canada, given the right project, it’s time to sit up and pay attention. Rio doesn’t produce any lithium at the moment, and they just happen to be on the hunt for a top-tier asset. Rio… I’d like to introduce you to Patriot and their Corvette.
It could be a case of right place, right time for Corvette, with its size, scale and quality, and Rio’s desire to take on long-life assets.
If Rio were to make an offer, they would have to compete with lithium powerhouse Albemarle we mentioned above, which invested $109 million in the project, taking a 4.9% interest in Patriot. With some simple maths, you will work out that to get to 100% of the project valuation from Albemarle's investment, it would mean PMT would be worth about $2.2 billion—nearly double the current valuation.
Potential risk
It’s hard to find holes in the Patriot Metals story. The team at Equities Club has looked into everything Patriot and narrowed it down to one potential wrinkle - delays in environmental approvals. We’ve seen fellow Canadian lithium explorer Arcadium Lithium go through a long and drawn-out environmental process over years, but the good news for Patriot is the Canadian government is pushing ahead with investing in green projects, and Arcadium just had their James Bay deposit environmental licence approved. In our team's eyes, it’s no longer, ‘Will they be approved?’, but just, ‘How long will it take?’.
We really like what we see with Patriot, it’s hard not to. Does this mean that everything will go to plan and Patriot will become the Pilbara Minerals of North America? Maybe, maybe not, but we can certainly say it has all the right ingredients to give it a red-hot crack.
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