I have posted regularly on lithium this year. It performed really well until around late July/early August. When I last posted in July, the 60 companies on my list had a combined market cap of $3.9B.

Although there are other companies that have joined the space, I will stay with the 60 companies for comparative purposes. Today, those 60 companies have a market cap of $3.6B. While this is a very modest decline, it reflects the huge increase in the number of shares on issue for the sector; from 40 billion in July to 48 billion today, an 18% increase.

Share price is a different matter. The average share price of the 60 has decreased by 14% since July.   The chart below is cause for reflection. Only 9 of the 60 made gains during the six week period.

lithium_sept

In my opinion the sector is still overvalued. There is already an enormous existing resource base of lithium, mostly in low cost, high quality brines. A lithium grade of 1.5% in pegmatites is unlikely to get a look in, unless advanced and well funded.  Be cautious.

 

01 September 2016 Commodities