Lithium – September Death Throes
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.
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.