American Lithium stock: Hope hanging by a thread

Last Updated: 15. Januar 2024By

The lithium sector still has the potential for positive surprises. This was revealed a few days ago by the American Lithium stock. But see for yourself (as of 11.01.24, 10:30 a.m., Stuttgart Stock Exchange):


The yellow arrow marks a price increase of almost 9 percent on January 10. But what happened? The lithium developer published an update on its Falchani project in southwestern Peru last Wednesday. This is an advanced hard rock deposit that is said to contain one of the largest untapped lithium deposits in the world.

Falchani: American Lithium raises value forecast

The potential of Falchani, in any case, is apparently even greater than originally thought. This is the result of the economic feasibility study (PEA) presented by American Lithium on Wednesday. According to this, the estimated value of the lithium project is now $5.11 billion (after-tax net present value). This corresponds to a tripling compared to the previous forecast.

The significant increase is due to the fact that the new study expects a higher market price for high-purity lithium carbonate equivalent (LCE). In the previous study from 2019, a price of $12,000 per ton of LCE was estimated – now it is $22,500. In fact, the lithium price is currently higher than in 2019, but still significantly lower than in the boom year 2022.

Operating period: Lithium developer aims for 43 years

According to the new study, Falchani is expected to be active for a total of 43 years. 32 years of this will be for mining. In the remaining 11 years, the remaining stocks will be used for further processing.

Also interesting: The payback period of the initial capital is expected to be 3 years after taxes. The initial capital costs are estimated at $681 million, with total investments of around $2.57 billion.

CEO Simon Clarke fuels hope…

Company CEO Simon Clarke took the results of the new economic feasibility study as an opportunity to create some hope: „The very strong increase in net present value in combination with a low initial investment and robust profitability in the updated PEA for Falchani is the culmination of successful work programs in recent years to optimize the site and flow plan, combined with an improved lithium price environment,“ emphasized the American Lithium CEO.

In addition to lithium carbonate, the site is also expected to offer potassium sulfate (important for fertilizers) and cesium sulfate by-products. This will increase the after-tax net present value to $5.58 billion, according to the junior miner.

…But the stock market doesn’t really trust it

Despite this, as you can see in the chart above, the news on Wednesday helped the stock make a comeback. However, the stock is still far from its previous highs. And on Thursday, the stock had to make concessions again. The stock market does not seem to completely trust it.

This is also due to the fact that the outlook for the lithium price has recently experienced significant cracks – due to the sometimes rather sluggish breakthrough of electromobility, but also because alternative battery technologies could overtake lithium.

In addition, there are location risks for American Lithium. The junior miner is still waiting for the approval of an early environmental study by the state actors in Peru. If politics approves this, the mining permits could be accelerated. However, in the South American country, there were significant protests last year after former President Pedro Castillo was overthrown and arrested. These also had a negative impact on the mining sector in the south of the country, as many miners then stopped working. Although the situation on site has now calmed down somewhat, the political volatility of Peru remains a risk factor for companies like American Lithium and their investors.

My conclusion for you

Even though lithium stocks have come back down to earth in 2023, you shouldn’t write off the battery metal just yet. Lithium is still the crucial raw material for the transformation of individual traffic and is likely to remain so for the time being.

However, the uncertainty surrounding the American Lithium stock cannot be denied. While the company apparently has a gigantic deposit, the political instability of Peru and the still unclear start date make the stock a risky investment. If you want to invest in the lithium market and increase your investment security, I think you should focus on established players. In particular: Albemarle or Arcadium Lithium (new merged company of Livent and Allkem).