Schlumberger’s Expansion Into Lithium Suggests Junior Miners Are Attractive Acquisition Candidates

In a sign of the strong fundamentals of lithium, a key electric vehicle (EV) battery metal, oil service giant Schlumberger Limited (NYSE: SLB) announced on March 18 that it plans to build a lithium extraction plant in Nevada. More specifically, the company plans to extract lithium from brine at its proposed Clayton Valley project site. Schlumberger hopes its plant can begin operating by the end of 2021.

The key read-through from this decision is that extremely well capitalized companies may be seeking to enter this space, potentially making junior miners like Lithium Americas Corp. (TSX: LAC) and American Lithium Corp. (TSXV: LI) acquisition candidates, particularly as they near the start of commercial production.

Stocks of Lithium Miners Have Dramatically Underperformed Over the Last Two Months

As investors have rotated to cyclical, “economy re-opening” stocks over the last two months, lithium junior mining stocks have performed extremely poorly over that period. For example, Lithium Americas and American Lithium have declined 39% and 31%, respectively, since February 8, 2021. Perhaps this underperformance, coupled with the Schlumberger announcement, creates attractive entry points for these stocks.

In the graph below, Lithium Americas, American Lithium, large-cap lithium miner Albemarle Corporation (NYSE: ALB), and the S&P 500 Index are presented in index form and in terms of common currency, where 100 is the uniform starting point. The S&P is essentially unchanged and Albemarle has declined about 11%. Both have significantly outpaced the smaller junior lithium miners.

Lithium Miners Seem Well Protected Regardless of Electric Vehicle Battery Chemistry

Per a recent tweet from CEO Elon Musk citing concerns about sourcing nickel, Tesla is shifting its standard-range car batteries to lithium iron phosphate (LFP) batteries from lithium-ion batteries. Lithium is a key component of both LFP and Li-ion cells, while nickel is used in the latter but not the former. As a result, lithium miners may in some sense be considered “more protected” from EV market conditions than nickel miners.

Depiction of an LFP Battery
Nickel is a key component in lithium-ion EV batteries.

While the stock prices of lithium miners have corrected, the price of the underlying lithium commodity continues to increase. Battery-grade lithium-carbonate prices have more than doubled since the early fall of 2020.


Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Video Articles

Snowline Gold: The Multi Billion Dollar Valley PEA

Euro Sun: Rovina Copper-Gold Project Secures Some Major Funding

Arizona Metals: The Disappointing Kay Mine Resource Estimate

Recommended

Antimony Resources Drills 4.17% Antimony Over 7.4 Metres At Bald Hill

ESGold To Expand Mine Building At Montauban In Advance Of Gold & Silver Production

Related News

Neo Lithium To Be Acquired By Chinese Mining Firm Zijin In A $960 Million All-Cash Deal

Neo Lithium Corp. (TSXV: NLC) announced on Friday night that it has entered into a...

Tuesday, October 12, 2021, 09:29:00 AM

Cypress Development Begins Testing Extraction Of Lithium From Clay

Cypress Development Corp (TSXV: CYP) has begun the process of extracting lithium from claystone. The...

Wednesday, November 10, 2021, 08:53:47 AM

Is Big Oil Moving To Big Lithium?

Major US oil companies are shifting their focus to lithium, a crucial component in electric...

Wednesday, July 26, 2023, 03:40:00 PM

South American Countries Mulls “Lithium OPEC” As Prices Hit 13-Month Low

Argentina, Chile, Bolivia, and Brazil are considering forming a sort of lithium cartel to enhance...

Tuesday, March 7, 2023, 11:38:00 AM

Lithium Americas Reportedly Close To Receiving US$1 Billion From U.S. DOE For Thacker Pass

Last week, several media sources reported that the U.S. Department of Energy (DOE) may lend...

Monday, October 2, 2023, 06:47:00 AM