What happened
Shares of aspiring lithium producer Lithium Americas (LAC) are down 4.4% today as of 11:20 a.m. ET. There was no specific news from the company causing the decline.
This has been a tough year for many base-material and metal-mining companies. Soaring commodity prices have begun to moderate, and investors have been fleeing stocks as the Federal Reserve tries to fight inflation with its blunt-instrument interest rate hikes.
Nevertheless, lithium prices have been resilient and remain near all-time highs. Lithium Americas stock is down only 7% so far this year, handily beating the S&P 500's negative 22% return.
So what
For all of the bluster around lithium (electric-vehicle batteries need a lot of the stuff), it's important to remember Lithium Americas is still a pre-production company. One of its sites in Argentina is approaching early ramp-up of production, and the Nevada property is progressing toward construction. But as of the second quarter, there still was no revenue. Expenses in the quarter were $90 million, leaving $441 million in cash and equivalents remaining in the bank.
Now what
Expect plenty more ups and downs for Lithium Americas stock, especially during this period of pre-production. The company could be entering the market with its product at an ideal time with lithium prices so high, and demand for electric vehicles and other big-battery applications like renewable energy isn't going to diminish anytime soon.
Nevertheless, this company's fortunes will primarily rely on how soon it can start generating some revenue from its operations (first in Argentina) and then how quickly it can ramp up production from there. Management is also exploring options for separation of its U.S. and Argentina operations. No word on what that would look like (perhaps two separate lithium development companies), or if it will happen at all.
For now, this is a high-risk, potentially high-reward lithium stock. There are other lithium companies that are in production mode that can be invested in now if Lithium Americas is too speculative for your taste.
