CA - Lithium Americas (Argentina): A Winner Even With Low Lithium Prices

2024-07-19 04:28:56 ET

Summary

• Many lithium companies have gotten hammered as underlying commodity prices have come down, presenting investors in LAAC an opportunity to acquire two world-class assets at a steep discount.
• With poor market sentiment, investments into lithium projects have ground to a halt, allowing the industry to gradually shift toward an undersupply and positioning prices for recovery.
• Even in this “weaker” lithium market, LAAC is well-positioned to generate significant profitability given its position at the bottom end of the production cost curve.
• With a major partner in Ganfeng and its production ramp already significantly underway, LAAC is already materially de-risked and on its way to becoming a major lithium producer.
• Without any recovery in lithium prices, LAAC shares still have near-term upside in excess of over 100% - or 700% if lithium prices reach $35,000/tonne.

With lithium prices well off their recent highs, many companies across the industry have been the victims of significant value destruction as investors have fled for more stable investments. Lithium Americas (Argentina) ( LAAC ) has been one of the companies most affected by this, shedding over half of its value since separating from Lithium Americas ( LAC ). This article seeks to examine why the lithium selloff as a whole seems to have been largely overdone, and why LAAC may have the most to gain in a rejuvenated market.

The Lithium Cycle

Since December, lithium spot prices have remained relatively stable as carbonate has traded between $12,000/tonne and $16,000/tonne. Now, a 33% variance may not seem like the classic definition of “stability” but, in the lithium industry, that’s what passes as a period of relative market stability....

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