Albemarle, Livent Rise on Evercore Upgrade to Outperform

Albemarle, Livent upgraded as Evercore ISI analyst says he is 'all in' on lithium producers.
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Albemarle  (ALB) - Get Report and Livent  (LTHM) - Get Report were rising Monday after an Evercore ISI analyst said he was going “all in” on lithium producers and upgraded the companies to outperform from in line.

At last check shares of Albemarle, Charlotte, were up 3.6% to $157.57, while Philadelphia-based Livent was up 6.2% to $17.63.

The move comes as The Wall Street Journal and other services reported that Orocobre OROCF agreed to acquire rival Australian miner Galaxy Resources GALXF for stock, a deal that would create one of the world’s biggest lithium producers.

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Analyst Stephen Richardson raised his price targets, on Albemarle to $200 from $160 and on Livent to $22 from $20.

Richardson said in a research note that he upgraded his view of the lithium stocks to reflect "positive developments in industry fundamentals." 

The analyst described Albemarle as "the 800 lb. gorilla in the lithium market." He said the company has capacity coming on at the right time, with plans to expand capacity that could add 300,000 metric tons to its production, or triple its current capabilities.

Richardson said Albemarle "now has a clear line of sight to take advantage of increasing lithium prices and a tightening demand outlook."

The analyst noted that Livent has lost about 30% its their 52-week high due partly to COVID-19 surges in Argentina, where it has a salt-brine evaporation operation. 

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But, Richardson said resource expansion in the country is "a clear priority" and he ultimately assumes expansion of Hombre Meurto, the Argentine salt flat where Livent extracts lithium.

After reaching a bottom in the second half of 2020, Richardson said, lithium pricing has continued to move higher, led by battery-grade carbonate, as inventories in the supply chain work down.

While first-half 2021 pricing trends are expected to be challenging for producers that are largely contracted, the movement of spot indices above indicative contract prices is a key catalyst for the stocks, the analyst said. 

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In February, mineral producer Comstock Mining  (LODE) - Get Report unveiled a $10.8 million deal for rights to a stake of as much as 64% stake in lithium battery recycling company Linico.

Late last year, Tesla  (TSLA) - Get Report agreed to a five-year purchase of lithium for its car batteries from China’s Sichuan Yahua Industrial Group.