Last April, Chilean President Gabriel Boric announced that Chile would be nationalizing its lithium industry. This surprise announcement from Chile, the world’s second largest producer of lithium, raised further concerns on already sensitive lithium supplies. This isn’t the first instance of battery metal production being protected by restrictive trade policies, as countries are scrambling to secure their natural resources. Last year, Mexico also nationalized its lithium deposits. In 2020, Indonesia banned the export of nickel ore, another extremely valuable battery mineral that has ever increasing demand as EV manufacturers continue to use nickel in their EV batteries for increased driving ranges.
Due to these events, and an uncertain outlook for future lithium supplies (which are forecasted to be at a deficit to demand over the next few decades), lithium producers and miners are positioning themselves well to profit off of this lithium demand boom, as lithium becomes an increasingly important mineral in the clean energy transition.
Lithium is typically extracted through two main methods: mining and brine extraction. Mining involves extracting lithium-rich ores from underground or open-pit mines, followed by chemical processing to extract lithium compounds. Brine extraction involves pumping lithium-rich brine from underground aquifers into evaporation ponds, where solar evaporation concentrates the lithium for further processing. However, these methods have downsides. Mining can have significant environmental impacts, including habitat destruction and water pollution. Brine extraction requires large amounts of water, can affect local ecosystems, and often has a slow and weather-dependent process due to evaporation, resulting in longer production timelines.
However, there is another type of extraction process that is set to reshape global lithium production. Direct Lithium Extraction (DLE) is an innovative and environmentally friendly method used to extract lithium from brine sources or other lithium-rich solutions. Unlike traditional methods that rely on evaporation ponds, DLE technology allows for a more efficient and selective extraction process. It involves the use of specialized membranes or adsorbents that selectively capture lithium ions from the brine, separating them from other impurities. The captured lithium ions can then be further processed to produce high-purity lithium compounds used in various applications, including batteries. DLE offers advantages such as shorter processing time, reduced water usage, and lower environmental impact compared to conventional extraction methods, making it a promising approach for meeting the increasing demand for lithium in the rapidly growing electric vehicle and renewable energy industries.
At the forefront of this innovative lithium extraction process is Livent Corporation (NYSE: LTHM). Livent Corporation (NYSE: LTHM) is a lithium technology company that specializes in the development and production of lithium compounds used in various applications, including batteries for electric vehicles and energy storage systems. The company has a rich history that dates back to 1997 when it was spun off from FMC Corporation. Originally known as FMC Lithium, Livent operated as a division of FMC until its independence in 2018. As a standalone company, Livent focuses on leveraging its expertise in lithium production and processing to meet the growing demand for lithium-ion batteries in the rapidly expanding electric vehicle market.
In May, Livent Corporation and Allkem (ASX: AKE) announced a definitive agreement to combine the two companies in an all-stock merger, creating a leading global lithium chemicals producer. The transaction is set to close in 2023, and will lead to a lithium chemicals producer with CY '22 combined revenue of $1.9 billion and adjusted EBITDA of around $1.2 billion dollars, valuing the new company at around $10.6 billion dollars.
This merger will create a new company poised for future growth, helping serve customers with a more resilient supply chain and vertically integrated business model that allows for increased operational efficiency and flexibility. Additionally, the merger will create a strong combined balance sheet with strong cash flows, helping to deliver accelerated growth. Upon the completion of the Merger, Livent Corporation shareholders will own approximately 44% of the new merger company (“NewCo”) and Allkem shareholders will own the remaining 56%.
Additionally, U.S. Automaker Ford (NYSE: F) recently entered a long-term lithium supply agreement with Nemaska Lithium over the next 11 years, with the agreement calling for the delivery of up to 13,000 tons of lithium hydroxide per year. Nemaska Lithium is owned partially by Livent Corporation and Investissement Québec, the economic development agency for the Canadian Province of Quebec. This deal helps spur additional revenue generation for the company, ensuring sustained revenue growth.
Because of this, whales and institutional holders have been adding to their Livent Corporation positions. Looking at Quiver Quantitative’s Institutional Holdings Dashboard, we can see some large share purchases and additions by large asset managers and hedge funds. Large asset manager Grantham, Mayo, Van Otterloo & Co. had a 99.56% increase in shares held, along with Allianz Asset Management, which had a 114.73% increase in shares held (as reported on 03/31/2023). You can check out all of Livent Corporation’s recent institutional holdings data with Quiver Quantitative.
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