2017 will go down as the year when sentiment around the coming electric vehicle revolution radically shifted. Sure, the release of Tesla’s mass market Model 3 probably had something to do with it. But it isn’t just Tesla. Everyone – government forecasters, investment banks, oil market analysts, even oil companies themselves – have dramatically revised up their expectations for EVs.
The transformation is only recent, but it is momentous. Even some of the most hard-nosed skeptics are starting to believe. Dig through any research report on the topic from this year, and the projections are astounding. Just to take a recent one from Barclays – EVs could erase 3.5 million barrels of oil demand by 2025, and 9 mb/d by 2040. That means that in less than 25 years, EVs could go from a rounding error to capturing a third of the global auto market. And that isn’t even the most bullish scenario – other analysts see much more dramatic upheaval in energy markets in the not-too-distant future.
How is an investor supposed to play this energy revolution? Here are five different avenues that one could pursue:
#1 SQM (NYSE: SQM)
Lithium has become one of the preferred proxies for the EV boom…and for good reason. Lithium is a crucial component of the batteries needed in an electric vehicle. And not only is supply inelastic in the short-term, but analysts are wondering if and when lithium miners will ever catch up to soaring demand. Lithium demand is set to grow by a staggering rate for the foreseeable future as more and more EV manufacturers ramp up activity.
The obvious play is for lithium miners, and who better than Sociedad Quimica y Minera S.A. (NYSE: SQM)? In addition to Albermarle (NYSE: ALB), SQM is one of the leading global producers of lithium, accounting for nearly a quarter of the market at 48,000 tonnes in 2016. They have lithium brine assets in Argentina, which are set to expand, adding 25,000 tonnes by 2019. SQM also recently spent $110 million to take a 50 percent stake in a joint venture in Western Australia. Production will come online by 2021.
That may seem like a lifetime away, but it takes time to bring new mines online…and there are few that will outpace SQM. With supply relatively restricted in the short run, the bull run for lithium shows no signs of fading. Lithium carbonate prices have doubled in the five years to 2016, with forecasts showing substantial price increases for the next few years. “We don’t see any price fall in the next three years,” Simon Moores, managing director of Benchmark Mineral, said in a Bloomberg interview in August. “When you look at all the battery plants being built and the plans for EVs, even if only about 25 percent of those are realized, we’re still going to be short of lithium. It’s a unique once-in-a-generation situation.”
#2 Global Li-Ion Graphite Corporation (CSE: LION; OTC: GBBGF)
The rush for lithium is at this point a well-trodden story, with investors jumping into lithium mining companies large and small. But there are other critical elements that are essential to building an electric vehicle, and thus, could be poised for their own bull runs.
The one mineral may still be at the beginning of a massive upcycle is graphite, a crystalline form of carbon that is an unparalleled conductor of electricity and heat. Those qualities mean that graphite is highly important for the manufacturing of cutting edge batteries used in EVs. But even as graphite sees soaring demand for EVs, it also is useful for other industrial processes. It’s ability to withstand extremely high temperatures makes it desirable in steel furnaces, for example.
Global Li-Ion Graphite Corp. is a small pure-play graphite exploration and development company to keep an eye on.
While lithium enjoys the lime light as a central component in the EV boom, graphite is considered even more important. About 60 percent of the material used in batteries comes from graphite, and batteries use 10 to 20 times more graphite than lithium. Global battery-grade graphite use is set to more than triple over the next few years, from 80,000 tonnes per year up to 250,000 t/y by 2020, according to projections made by Global Li-Ion Graphite Corp. Demand is set to see similar growth rates – 200 percent by 2020 and 300 percent by 2025.
In fact, graphite will be the largest volume of input material used in Tesla’s Gigafactory. And who is situated literally within sight of the Gigafactory? Global Li-Ion Graphite Corp (LION). LION has a low cap, a tight capital structure, and has a management team with a long record of success building small mining companies.
LION is set to benefit enormously from its optioned property’s proximity to Tesla, which would want to gobble up its graphite if LION successfully produces the high quality graphite targeted. LION also has an MOU to buy graphite assets in Madagascar, strategically positioned to service the Indian and Chinese markets.
Prices for graphite are already rising, but the level of interest and attention is still at an earlier point than it is for lithium, meaning investors could get in early, betting that graphite and LION will succeed hand in hand. Prices for graphite, many analysts think, could double or triple from current levels.
#3 Ford (NYSE: F)
Investors looking to profit from the EV boom could also bet on an automaker, and while everyone has jumped into Tesla, pushing it to prohibitively expensive heights, why not bet on a proven manufacturer that also has ambitious goals for EVs? To be sure, Ford is a bit behind the ball, with rival GM (NYSE: GM) already out with several EV models.
But Ford has learned the lessons of some earlier duds, such as the Chevy Bolt and Volt, and has announced plans for a mass market vehicle by 2020 with a range in excess of 300 miles. Better yet, it will be an SUV, targeting a segment that few other automakers are attempting. Earlier this year it also announced plans to build a hybrid version of the F-150 truck, the bestselling vehicle in the U.S., as well as a hybrid version of its popular mustang.
Ford recently revealed details around its “Team Edison,” a group aimed at accelerating the company’s EV development plans. Ford will spend $4.5 billion over the next few years developing its EV lineup, and it will roll out 13 electric and hybrid-electric models, seven of which will be released within five years.
#4 AeroVironment, Inc. (NASDAQ: AVAV)
Another way to play the EV revolution is on infrastructure. Those millions of EVs that everyone believes will be on the road in a few years will need to charge up, right? AeroVironment (NASDAQ: AVAV) sells EV recharging systems. It has already teamed up with Volvo, Nissan, Ford, Chevrolet, Fiat, Hyundai, BMW and Mitsubishi, among others.
AVAV is in the process of building out the most extensive EV charging network in the U.S. on the West Coast. It offers a multi-tiered charging plan to customers, who pay a monthly rate and charge up using a key fob at the point of recharging.
The North American auto market is set to exceed 20 million vehicles in 2017. If EVs capture 5 percent of the market – a milestone entirely possible within a few years’ time – the EV recharging market will exceed $1 billion, assuming the $1,000 cost of a home charging system. AVAV is a leading provider of that equipment and is set to profit handsomely from the buildout of EV recharging systems.
The only problem is that the secret is starting to get out. AVAV’s stock has doubled since the start of the year, making an entry point a bit more expensive.
#5 Vale S.A. (NYSE: VALE)
The third miner on the list, Vale (NYSE: VALE) benefits from producing two crucial components for EVs: cobalt and nickel. The Brazilian mining giant Vale is much more known for iron ore production, but it is also a leading producer of two key metals for the batteries needed in EVs.
Vale’s nickel unit is not flawless, but the company is unloading some loss-making nickel mines. As it sheds fat, its cash flow will improve. Nickel prices have not been the best, but the demand pull of EVs should help. Nickel-manganese-cobalt batteries will be pivotal to EVs because of their range. One estimate from UBS predicts that nickel demand will triple by 2025, from 300,000 tonnes to 900,000 tonnes. But supply is still large, which will prevent a price run similar to lithium or cobalt.
Speaking of cobalt, though, Vale is also a major producer of this essential metal needed for EVs. Unlike nickel, cobalt prices are spiking, up 80 percent since the beginning of the year and up 112 percent in the past 12 months. Battery manufacturing is responsible for a whopping 40 percent of cobalt demand, which means demand for cobalt will rise rapidly, riding the EV wave. Demand for cobalt could jump by 11.6 percent CAGR over the next decade. Goldman Sachs predicts that the battery market will reach $40 billion by 2025.
Vale produced just under 6,000 tonnes of cobalt in 2016, significantly less than some of its larger competitors in the space. But Vale enjoys the benefit of selling both cobalt and nickel, giving it two avenues to profit off of the EV revolution.
More hot companies in the EV space:
Lithium Americas Corp. (TSX:LAC) is a resource company with a focus on lithium development. The company’s two large plays, the Cauchari-Olaroz project in Argentina – a joint venture with Sociedad Química y Minera de Chile - and the Lithium Nevada project in Nevada, are promising assets that will be sure to provide the company for many years to come.
The company’s impressive market cap, keen eye for investments, and excellent partners have certainly sparked the interest of investors. The company’s YTD stock value has increased by over 100% and shows no signs of slowing down.
Constellation Software (TSX:CSU): The story of Constellation Software has been one of constant growth, with a stock graph to rival that of Tesla. Canada’s largest software company has always focused on the future of tech, buying up promising start ups and successfully dominating the space nationally.
Canada is often pointed to as a fertile ground for tech development and AI, and if there is one way to get in on the technology boom here, it is with this $15 billion market cap giant. The energy revolution is making different industries increasingly interconnected, and software development is sure to gain ground as the future draws nearer.
American Manganese (TSX:AMY): This small-cap is developing processes to recycle metals inside depleted batteries, and it’s the first to develop tech to create high-grade manganese at its mining project in Arizona. They also run a cobalt and gold mine in British Colombia.
With strong news coming from the company, invests can be confident that their money will be taken care of in the hands of American Manganese.
Neo Lithium Corp. (TSXV:NLC) is a promising Lithium junior. It currently focuses on the lithium salar and brine reservoir complex in the Catamarca Province, Argentina.
The company recently stated that its annual production of lithium carbonate should be around 35,000 tonnes per year. The next big catalysts for the company is likely to be its final mining permit which the company expects to receive in Q1 2018.
The company’s stock has posted strong gains since the end of August, but might have become slightly overbought by now.
CGI Group Inc (TSX:GIB.A) manages IT services, including systems integration and software solutions. The recent move towards Robotic Process Automation has seen this tech giant increase its interest in digital systems and artificial intelligence as it attempts to keep up with the current tech boom.
With a market cap of $17.5 billion there are few companies with the means and reputation to keep up with CGI Group. Its consistent growth saw a slight lull in August which provided investors with a great buying opportunity. Investors should keep an eye on this tech giant that is once again seeing strong growth.
FMC Corp. (NYSE:FMC) founded in 1883, FMC has been around the block and back. FMC has a long history stretching between many different industries, but within all of them, FMC has remained a leader in innovation.
FMC’s involvement in the lithium industry is particularly notable. The company is one of the top three in lithium and associated technologies. It is one of the largest suppliers into electric vehicle applications using lithium hydroxide.
Strong growth in lithium is expected to drive margins for FMC and major expansion, leading analysts to give it an outperform rating. The company’s full year 2016 results were impressive, with lithium segment earnings of $21 million—up an amazing 90 percent from Q4 2015.
**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**
Forward-Looking Statements
This news release contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this release include that LION will complete its announced transaction to purchase the Nevada carbon exploration property; that graphite and graphene will have all applications and will be as much in demand in future as currently expected; that LION can fulfill all its obligations to exercise its Nevada property option; that LION’s Nevada property can achieve drilling and mining success for graphite; that LION will close its MOU to buy a Madagascar mining licenses; that production can go online in the near term in Madagascar; that LION will obtain drilling permits on its Nevada and Madagascar properties; that the graphite in Nevada and Madagascar when produced will be high quality suitable for the tech industry; and that LION will be able to carry out its business plans. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that the Company may not agree on the final terms for the Madagascar property, even if it agrees it may not be able to finance its acquisitions of Nevada or Madagascar, it may not get regulatory approval for these acquisitions, aspects or all of the properties’ development may not be successful, mining of the graphite may not be cost effective, LION may not raise sufficient funds to carry out its plans, changing costs for mining and processing; increased capital costs; the timing and content of upcoming work programs; geological interpretations and technological results based on current data that may change with more detailed information or testing; potential process methods and mineral recoveries assumptions based on limited test work with further test work may not be viable; additional high value mineral properties may not be available for LION to acquire, or LION may not be able to afford them; competitors may offer better technology than graphite technology for technology; the availability of labour, equipment and markets for the products produced; and despite the current expected viability of its projects, that the minerals cannot be economically mined on its properties, or that the required permits to build and operate the envisaged mines cannot be obtained. The forward-looking information contained herein is given as of the date hereof and the Company assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
DISCLAIMERS
PAID ADVERTISEMENT. This communication is a paid advertisement and is not a recommendation to buy or sell securities. Safehaven.com, Advanced Media Solutions Ltd, and their owners, managers, employees, and assigns (collectively “the Company”) has been paid by the profiled company or a third party to disseminate this communication. In this case the Company has been paid by LION one hundred and twelve thousand five hundred US dollars for this article and certain banner ads. This compensation is a major conflict with our ability to be unbiased, more specifically:
This communication is for entertainment purposes only. Never invest purely based on our communication. Gains mentioned in our newsletter and on our website may be based on end-of- day or intraday data. We have been compensated by LION to conduct investor awareness advertising and marketing for CSE:LION and OTC:GBBGF. Therefore, this communication should be viewed as a commercial advertisement only. We have not investigated the background of the company. The third party, profiled company, or their affiliates may liquidate shares of the profiled company at or near the time you receive this communication, which has the potential to hurt share prices. Any non- compensated alerts are purely for the purpose of expanding our database for the benefit of our future financially compensated investor awareness efforts. Frequently companies profiled in our alerts experience a large increase in volume and share price during the course of investor awareness marketing, which often end as soon as the investor awareness marketing ceases. The investor awareness marketing may be as brief as one day, after which a large decrease in volume and share price is likely to occur.
We do not guarantee the timeliness, accuracy, or completeness of the information on our site or in our newsletters. The information in our communications and on our website is believed to be accurate and correct, but has not been independently verified and is not guaranteed to be correct. The information is collected from public sources, such as the profiled company’s website and press releases, but is not researched or verified in any way whatsoever to ensure the publicly available information is correct. Furthermore, it is certainly possible for errors or omissions to take place regarding the profiled company, in communications, writing and/or editing.
DISCLOSURE. The Company does not make any guarantee or warranty about what is advertised above. This article and the information herein are provided without warranty or liability.
NOT AN INVESTMENT ADVISOR. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.
INDEMNIFICATION/RELEASE OF LIABILITY. By reading this communication, you agree to the terms of this disclaimer, including, but not limited to: releasing The Company, its affiliates, assigns and successors from any and all liability, damages, and injury from the information contained in this communication. You further warrant that you are solely responsible for any financial outcome that may come from your investment decisions.
RISK OF INVESTING. Investing is inherently risky. While a potential for rewards exists, by investing, you are putting yourself at risk. You must be aware of the risks and be willing to accept them in order to invest in any type of security. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell securities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
All trades, patterns, charts, systems, etc., discussed in this message and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author and do not necessarily reflect those of the publisher.
