19 Lithium Junior Mining Stocks
One of our most popular articles lately has been one we published in August 2015 titled “Don’t Invest in Lithium Mining Companies“. The reason this article has become quite popular lately can be attributed to the below graph from Google Trends that shows people’s interest in lithium mining based on their searches:
As you can see in the above chart, interest in lithium mining peaked in 2010, and now this theme is becoming popular again. Our previous article discussed how the 3 dominant lithium mining companies are responsible for over 90% of the world’s lithium production. Since that article was published, these three companies have realized a +13% increase. Why so low? The reason is that lithium contributes a very small proportion of revenues for each of these three companies.
Our readers were quick to point out that we shouldn’t overlook the potential of junior lithium mining companies. The problem with this investing thesis is, that the majority of these companies are only accessible to U.S. based investors via the over-the-counter exchange (OTC) which is rife with scams and companies that typically lose investors’ money. Since our first article, lithium prices have been on a tear and consequently all companies attaching themselves to the lithium story have experienced a strong increase in share prices. Here are 19 junior lithium mining companies mentioned by our readers and their share price performance over time (MC is the present market cap of each company in U.S. dollars):
|Lithium X Energy Corp||CVE:LIX||+244%||+287%||N/A||64|
|Rare Earth Minerals||LON:REM||-25%||-54%||-2%||55|
|Pure Energy Minerals||CVE:PE||+24%||+208%||+47%||37|
|Red River Resources||ASX:RVR||+23%||-21%||+35%||17|
|International Lithium Corp||CVE:ILC||+33%||+300%||-71%||6|
|Nevada Sunrise Gold Corp||CVE:NEV||-9%||-45%||-68%||5|
The first takeaway is that if you invested in all 19 of these lithium junior mining companies in 2010 when the theme was subjected to a great deal of hype, you would be up +28% compared to an S&P return of +54%. If you remove the outlier, Pilbara Minerals, you would be down -16%. On the other hand, if you invested in all lithium junior miners exactly one year ago, you would be up +218% compared to a -1% return for the S&P500. Transaction costs aside, these are some spectacular returns for “speculators” in the short term. For “investors” who bought into the last lithium hype in 2010, you’re still down compared to a much less risky investment in the S&P500. Since lithium isn’t a publicly traded commodity, we can only assume that the price of lithium has increased 3X in order to merit the fact that all lithium junior miners have increased accordingly in just 1 years’ time. It will be interesting to see how many of these companies are still around 5 years from now.
So if we are invested in some or all of these companies, the question becomes when do we sell? Based on the performance trends we see, the answer would be not yet. However if you are waiting for one of these junior miners to sign an agreement with Tesla, don’t expect a huge return if that news comes out. Bancora Minerals signed an agreement with Tesla last year, and yet the share price has lost -19% in the last year.
So if you’re keen on investing in lithium junior mining companies, you can buy a basket of the above 19 lithium junior mining stocks. Note that the entire market cap of all 19 lithium junior mining stocks does not even exceeed $2 billion in total market cap. For U.S. based investors, you’ll either need to trade this basket by buying these stocks on the illiquid OTC market, or pay extra transaction costs to buy these stocks on their native exchanges.
We’ve excluded any company that had a market cap less than $5 million USD because these companies generally showed horrendous 5-year returns. Are there any lithium junior mining companies with a market cap greater than $5 million USD that you think we missed? Drop us a note.