Analyst: Undervalued Lithium Tech Stock Could Be Opportunity

After sinking nearly 60% from mid-April, Lithos Group Ltd.'s (LITS:CBOE.CA; LITSF:OTCMKTS; FSE:YU8; WKN:A3ES4Q) stock is artificially low and could represent an excellent buying opportunity for investors, ?? said.

An early partner in the company cashed in shares in April, a CA$3 million capital raise with Beacon Securities Ltd. failed, and an analyst left a large institution which then sold its position in the company, contributing to the decline, Chief Executive Officer Scott Taylor told Streetwise Reports.

But in addition to having its AcQUA™ technology — which allows lithium needed for the world's energy transition to be extracted from brine without using water-intensive, environment-damaging evaporation ponds — LiTHOS is on the edge of major catalysts.

"We are on the precipice of securing our first major commercial contract, announcing our spectacular technical results achieved to date, and an exclusive relationship with the most advanced technology provider in the world, (and) we have a growing pipeline of additional customers being brought online this summer and fall," Taylor said.

LiTHOS has completed demo-scale proposals for two existing lithium mining companies and completed testing with another. The company also noted it was in conversations with at least seven other speculative lithium miners and five oil and gas companies.

It's also in contention for US$30 million grant (its market cap was CA$24 million on Tuesday) from the Department of Energy and is seeking third-party evaluation of its technology.

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The Potential Catalysts: Big Customers, a Large Grant, and Third-Party Validation

Headquartered in Denver, Colorado, LiTHOS Group aims to "become the global standard in economically efficient, sustainable lithium production," the company said.

Its AcQUA™ technology spans the whole value chain from the conditioning and pretreatment of raw brines, the primary bottleneck, through the direct lithium extraction (DLE) phase to the polishing and purification of battery-grade lithium feedstock. About 70% of global lithium resources are hosted in brine

The DLE process could nearly double the production of lithium from brine, Goldman Sachs analysts wrote in a research note last year, boosting recoveries to 70% to 90% from 40% to 60%, thereby improving project returns.

LiTHOS has two fully operational facilities, a 4,000-square-foot laboratory in Denver and a 55,000-square-foot complex that enables an expansion for the company, permitted to produce pilot-scale lithium hydroxide in Bessemer, Ala.

"We're negotiating three multimillion-dollar pilots after spectacular lab results with three of the largest lithium brine producers in the Western Hemisphere," Taylor said.

Two of those companies are in Chile, and one is in Argentina.

In January, LiTHOS subsidiary Aqueous Resources applied for the US$30 million grant from the U.S. Department of Energy (DOE) to expand the Alabama facility. Awardees could be announced any day. "That's worth more than our market cap," Taylor said.

LiTHOS has also hired engineering company Hatch Ltd. to do an independent valuation of AcQUA™'s results.

"We felt this was a good step to try to get some independent validation over what we've been claiming," Taylor noted.

Market Weighed Down but Expected to Bounce Back

Lithium is an important part of the energy transition for electric vehicle (EV) batteries and energy storage systems. The soft and silvery metal also strengthens alloys and serves as a high-temperature lubricant. China dominates the market.

According to a report on FundsSociety.com, "inventories are weighing down the market," which is also affecting lithium stocks. Prices fell below US$13,000 a ton in June, the lowest in 35 months, according to S&P Global Commodity Insights data, CarbonCredits.com reported.

However, there's no doubt the market is growing and will grow. According to Fortune Business Insights, it was worth US$22.19 billion in 2023 and is projected to grow to US$134.02 billion by 2032 at a compound annual growth rate (CAGR) of 22.1%.

"The growing adoption of hybrid and electric vehicles, high-drain portable electronics, and energy storage systems have boosted the growth of the overall market," Fortune Business Insights analysts wrote. "The increasing awareness of electric vehicles is attributable to the growing concerns about surrounding environmental pollution as EVs reduce carbon emissions. … Li-ion batteries will likely play a major role in the highly electrified transport sector."

Lithium-ion batteries are "a crucial component in cleaning up the environment," the analysts said.

The consensus among market analysts points to a recovery in lithium prices in the fourth quarter of 2024, Fastmarkets reported. 

"This optimism is grounded in expectations of increased activity . . .  to meet end of year targets, strong battery production seen in March and April finally filtering through upstream and low inventory levels necessitating restocking," the website noted.

Yvonne Yue Li and Annie Lee wrote for Bloomberg that "according to traders familiar with the matter, manufacturers grappling with slowing EV demand growth have been cutting orders for lithium products, in anticipation that they may soon be able to restock inventories at even lower prices." 

"Still, some traders said they see limited downside in prices, which have already been squeezing the margins of some higher-cost producers. Contracts in Guangzhou for July are the cheapest on offer, suggesting a bottoming out during summer," they wrote.

The market optimism "is grounded in expectations of increased activity . . .  to meet end of year targets, strong battery production seen in March and April finally filtering through upstream and low inventory levels necessitating restocking," Fastmarkets noted.

Katusa Research predicted the lithium market could have a major breakout this year, citing its use in EVs and storage batteries as key drivers. 

"The opportunity in lithium is more electric than ever," Katusa wrote.

Ownership and Share Structure

About 60% of LiTHOS is held by insiders and management, the company said. According to Reuters, this includes CEO Scott Taylor with 14.19%, Independent Director Michael Westlake with 0.71%, and

Independent Director Kevin McKenna with 0.05%.

About 27% of the company is held by strategic entities. The rest is retail.

LiTHOS has a market cap of CA$24 million with about 84.62 million shares outstanding. It trades in a 52-week range of CA$0.98 and CA$0.24.

Important Disclosures:

1. Lithos Group Ltd. has a consulting relationship with an affiliate of Streetwise Reports, and pays a monthly consulting fee between US$8,000 and US$20,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Lithos Group Ltd.
3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
4.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

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