The revolutionary growth being experienced in the electric vehicle (EV) market goes much deeper than the car sales that we as consumers see at the surface. Sure, Tesla is charging ahead with four of the top 12 EV models in 2021 -- by total units sold -- and companies like Ford and General Motors are drafting behind the leader as sales are increasing, but the one thing in common that all of these vehicles require is batteries.
To be more specific, lithium batteries are what's currently powering us into the future for the EV market. For investors, lithium producers have made for a good investment opportunity. For example, the larger lithium producer Albemarle -- with its $29 billion market cap -- has seen its stock price jump by over 355% since the end of March 2020, to over $230 per share. But there is one smaller -- by market cap -- lithium producer that can offer investors an opportunity to load up on shares for as little as $5,000.
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Growing demand leads to an 11% increase in raw materials produced
Pilbara Minerals Limited (PILB.F -3.01%) is a lithium mining company headquartered in Australia, with an emphasized focus on spodumene mining -- using these raw materials to be crushed and produced into a concentrate that is used in lithium chemicals that go into batteries for electric vehicles.
The company currently owns and operates 100% of the world's only independent hard rock lithium operation, found in Australia. Its global partners include Ganfeng Lithium, China's premier lithium producer and the largest worldwide producer with a $39 billion market cap. It also doesn't hurt Pilbara that Ganfeng supplies a star-studded customer list, including Tesla.
In its September quarter, Pilbara saw continued demand in lithium raw materials, along with a rise in prices for its materials, leading to record operating cashflow of $137 million. The quarterly record amount of 89,000 tons of spodumene concentrate produced during the quarter was 11% over the previous quarter, and the amount shipped exceeded the upper end of guidance, resulting in 91,500 dry metric tons shipped, compared to a guidance range of 77,000 to 90,000.
The record quarter helped investors continue to enjoy a stock price run, moving up and to the right for over a year, climbing from $0.67 in January 2021 to over $2.40 per share as of this week, representing a 258% increase. The increase has been driven by confidence in the growing EV market and higher demand for the lithium that powers that market.
As lithium demand increases, more pressure will be put on the producers of resources. This could lead to a continued rise in prices, more business pushing toward Pilbara, and could open up the possibility for M&A action. The company was sitting on $137 million in cash at the end of Q3, giving it plenty of room for exploring expansion opportunities.
Projected market growth favors a buy
Expansion may be what's needed to fulfill growing demand. Ord Minnett, an Australian wealth management company known for tracking the demand for lithium, recently raised its 2030 forecast of the penetration rate for battery-powered electric vehicles to 34% from 21%, noting that the compound annual growth through 2030 has been increased from 19% to 24%.
According to Grandview Research, the global lithium market size is expected to grow at a compound annual rate of 14.8% through 2028. Further noted is that the EV market's demand for lithium-ion batteries is a driving force of "significant volume" behind the projected growth.
Investment in lithium producers could reap huge gains over the next 10 years based on demand from electric vehicle battery companies. Pilbara provides an opportunity for investors to take advantage of the burgeoning EV market regardless of which car manufacturers may become the top sellers.
Investors who invested $5,000 in Pilbara one year ago would be seeing that investment worth $17,900 as of Jan. 6. Imagine what an investment today might look like by 2028 in a market growing at 15% CAGR.