Please ensure Javascript is enabled for purposes of website accessibility

Why Lithium Americas Stock Is Soaring 16%

By Rich Smith – Sep 14, 2020 at 1:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A weekend report revives hopes for increased lithium demand.

What happened

Shares of profitless, revenue-less lithium miner Lithium Americas (LAC 5.43%) are up a strong 16.1% as of 11:40 a.m. Monday morning. Curiously, there doesn't appear to be any news pertaining to Lithium Americas in particular.

There is, however, a new report out on the state of global lithium supply and demand from mining research and consultancy group Wood Mackenzie.  

Lithium salt evaporation ponds

Image source: Getty Images.

So what

As reported on over the weekend, Wood Mackenzie just prepared a report on the likely demand for lithium that will be created if the electric car industry grows as expected over the next five years.

According to the analyst, the world needs to be producing about 800,000 tons of Lithium Carbonate Equivalent (LCE) annually by 2025 in order to meet demand for electric cars, and also limit global warming to no more than 2.5 degrees Celsius over pre-industrial-age temperatures. The analyst puts this into context by saying that the additional production needed is equivalent to the current production of "eight mines the size of Glencore's Katanga."

Cobalt production will also need to double by 2025 under the analyst's forecasts, and nickel production must rise 25%.

Now what

Why is this significant for Lithium Americas investors? Currently, despite the name, Lithium Americas isn't actually producing lithium at commercial quantities. But the company has two mining projects under construction, one in Nevada and a second in Argentina. Once up and running, therefore, these projects promise to help solve both the global production problem Wood Mackenzie identifies Lithium Americas' own problem -- that is, the lack of revenue and profits.

Investors today seem excited by the prospect.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lithium Americas Corp. Stock Quote
Lithium Americas Corp.
$28.52 (5.43%) $1.47
Glencore plc Stock Quote
Glencore plc
$11.36 (3.27%) $0.36

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.