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Lithium is one of the world’s newest commodities and the metal that most people know about from its use in lithium-ion batteries. Rising electric vehicle (EV) sales have many investors interested in buying shares of companies that produce the raw material. But it’s important to understand the basics of this new market before investing.
Chile and Australia hold the largest reserves of this soft metal. Lithium isn’t mined in the same way as gold or silver, instead it must be extracted from mineral ore or below ground brine deposits and processed into the finished product – lithium carbonate. As a result, most lithium trading is done privately and prices aren’t widely available. However, China is a major consumer of the finished product and has developed a market where there is at least a publicly available price quote for the mineral.
Investors in lithium stocks should focus on producers with healthy profit margins, low debt loads and enough cash to fund growth. A good example is Albemarle Corp. (ticker: ALB), which is one of the world’s largest and most vertically integrated producers with mining, extraction and processing operations under a single umbrella. It also has a large stake in the lithium-rich Greenbushes deposit in Western Australia.
Other notable lithium producers include China’s Ganfeng Lithium, which holds interests in various projects worldwide. The company specializes in producing lithium compounds, but it’s expected to begin production of lithium metal next year at its Mount Marion project in Western Australia.