Hope everyone is enjoying their summers. With the stock market putting pressure on lithium battery manufacturing and mining sectors (and many other sectors across the board), I thought about going away myself, after seeing the recent charts that put many of the leading companies to drag from summer downward market activity as well as lower trading volumes. Among the leaders in the lithium industry, bearish signs were definitely affecting many of the leading stocks in the industry.
Whether your talking about A123 Systems, Ener1 Inc., Valence Technology, Electrovaya, or some of the mining juniors including Talison Lithium, Orocobre limited, Canada Lithium Corp., and Lithium Americas. You can see their stock charts and noticed that they have all been under some type of downward pressure during the first half of 2011. Have there been disappointments based on the share prices being stagnant over the last few months? Definitely, most are probably in agreement of that. Can we expect a better second half of 2011 for these stocks? I’d like to think so. If history teaches us anything, I believe that the second half of 2011 should give these industries a boost especially if we start to experience higher than normal energy prices of $120+ barrel of oil.
So that brings us to another question, where are we in the lithium cycle? looking at the sector, and seeing that many of the companies in the battery development and manufacturing firms in the US still are relying on government grants and funding to stay in business, along with seeing that energy prices at the gas pump are still at a moderate level, I believe we may still be in the second or third inning of this game. Meaning both sectors have not really broken out yet or even emerged to the investment or mainstream community. One interesting observation I by looking at stocks in both the battery mining and mining sector, is that one is dominated in the NASDAQ exchange while the mining companies are listed on the Toronto Stock Exchange. Ofcourse, one can understand why companies have chosen to list on their respective exchanges (believed that TSX is more suitable for resource companies). But one think I’d look forward to is to see some of these lithium mining companies cross the bridge and get better investment exchange by listing on a major exchange.
Are we starting to see some greater coverage in the sector? I am encouraged to say I’m starting to notice that. For example, one news report that I saw this morning was investment coverage linking global agricultural companies who are mainly producing Potash and boosting their stocks because they have upside with lithium. In this video, they promoted SQM for their business in Potash and lithium.
So this brings us to another question. Can we see more coverage in this sector when we face higher oil prices as many economists have predicted to occur in the coming 12 months? I hope so. If that’s what it takes to bring this sector up and running and emerge as a sector to invest in, then it definitely can be seen as an opportunity for many of these companies in this space to utilize an environment with higher oil prices to better promote their companies to shareholders as a solution to a widespread problem.