Lithium demand could fuel your wallet

The ups and downs of the price of gold are a permanent source of fascination. But lately attention has turned to “white gold” or lithium.

This metal is the essential component of lithium-ion batteries used in laptops, telephones, electric vehicles and in the storage of energy produced by renewable energy projects.

Such is the clamor for white gold that its price has soared 548% to $41,400 per metric ton in 2021. It is now $54,000 and Citigroup predicts it could reach $60,000 this year. Over the past 12 months, despite the crisis in Ukraine and other geopolitical threats, the price of gold has risen only 4%.

Big name: Warren Buffett’s Berkshire Hathaway mines lithium in Salton Sea, California

This week, Goldman Sachs informed clients that commodities were a “geopolitical and inflation hedge.” If you already own gold and oil stocks and can afford to take some risk, lithium may present another opportunity.

There are seismic expansion forecasts in the market, with a push to produce more metal in Europe.

Latin America and Australia lead the pack, although there are mines in the United States and Cornwall.

Private company Cornish Lithium hopes to produce 10,000 tonnes a year from its Trelavour mine by 2035.

Such is the level of excitement that shares of publicly traded Trident Royalties have soared 36% since the start of the year, following news that its 60% stake in the Thacker Pass lithium mine in Nevada holds reserves far greater than originally thought. . The rapid shift to electric cars is driving demand. A typical battery contains nearly 18 lbs of lithium. American and European automakers eager to exploit this trend want to challenge China’s dominance in lithium processing and battery manufacturing. About 65% of the batteries are manufactured there.

Simon Moores, managing director of lithium research group Benchmark Mineral Intelligence, said: “Building massive lithium-ion battery capacity at scale and securing supply chains is one of the biggest industry challenges in the 21st century. century.

The net zero race is also fueling the white gold rush. But investors who prioritize sustainability should note that lithium mining can damage ecosystems. Last month, pollution fears derailed Rio Tinto’s £1.8bn business in Serbia.

The failure of those ambitions sent shares of Rio Tinto plummeting, little surprise given that Covid caused the biggest metal shortage on record. Yet, although global supply is expected to triple to 1.47 million metric tons by 2030, demand could also soar. It could reach 2.4 million metric tons by that date. As revealed this week, Britain may only have half the battery production it needs in 2030, although Britishvolt, backed by, among others, mining giant Glencore, is building a gigafactory in Northumberland and Nissan’s battery supplier Envision is pouring more money into its Sunderland plant.

The white gold rush seems like an attractive prospect.

But if you want to join, remember that fortunes are far from guaranteed in any foray into commodities. Options include publicly listed companies Cadence Minerals and Zinnwald Lithium.

If you prefer a bigger company, Rio Tinto has, despite its Serbian setback, bought up Argentinian lithium miner Ricon.

Rio Tinto – which is committed to improving its operational performance and corporate culture – offers a dividend yield of 8.97% The Solactive Global Lithium Index is made up of the largest exploration, mining and battery manufacturing, including Tesla and Contemporary Amperex Technology, the Chinese group that is the world’s largest battery manufacturer. You may already hold some of it through funds and trusts.

Other constituents include Albemarle, the world’s largest lithium miner. For exposure to this company and the rest of the index, consider the Global X Lithium & Battery Tech exchange-traded fund (ETF) or the L&G Battery Value-Chain ETF. As Tracy Zhao of Interactive Investor points out, this fund’s portfolio includes the two Australian miners Mineral Resources and Pilbara Minerals, whose shares have risen 180% year-on-year.

Ben Yearsley of Shore Financial Planning suggests the Amati Strategic Metals fund, which holds gold and silver, but also less prestigious metals: “Its holdings include Atlantic Lithium, which drills in Ghana. The fund’s total exposure to lithium is 9%.

If you want to support a company that will recycle lithium batteries, Neometals, the Australian “urban miner”, which is listed on Aim, plans to build recycling operations in Germany and the United States.

Glencore – which now describes itself as the company selling the materials to help the world decarbonize – is setting up a recycling plant in Kent in partnership with Britishvolt. The company, which has a dividend yield of 4.5%, is setting aside £1bn to settle investigations into bribery and corruption, an issue that will deter some investors.

The involvement of Glencore and Rio Tinto underlines the interest in lithium. But another big name is also involved.

Warren Buffett’s Berkshire Hathaway extracts lithium from brine in the Salton Sea, California’s largest lake, 500 miles from the center of the original gold rush.

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