Investors who bought Australian lithium stocks at the start of the year could have doubled their money or lost more than half of it — reflecting the extreme volatility of companies mining one of the world’s hottest commodities. Lithium mining is dominated by small and mid-sized firms in Australia, the world’s No.1 producer of the critical electric vehicle battery ingredient. Previously unknown companies have soared in value after striking large deposits of lithium-bearing spodumene, mainly in Western Australia, while others have sputtered on uncertainty. The sector’s shares offer some of the most volatile returns on the benchmark S&P/ASX 200 Index, according to data compiled by Bloomberg.
Investors who bought Australian lithium stocks at the start of the year could have doubled their money or lost more than half of it — reflecting the extreme volatility of companies mining one of the world’s hottest commodities.
Lithium stocks are “the gambling end of town, they tend to attract hot money and retail” betting, said, a portfolio manager at Wilson Asset Management in Sydney. He owns shares in Pilbara Minerals Ltd., which transformed from a A$500-million junior miner three years ago to a A$15-billion giant producing 8% of the world’s lithium. The stock has risen 32% in 2023. He also owns Allkem, up 25%.
Australia’s lithium shares have tended to soar when companies announce a discovery, often with little regard to its size, accessibility or grade, said, portfolio manager at Westbeck Capital Management, an early investor in Pilbara Minerals and Patriot Battery Metals. “While confidence in the future of lithium remains robust, a discerning filtering strategy is coming into play,” said Hebe Chen, an analyst at IG Markets. “The challenges posed by lithium prices are prompting investors to seek shelter in well-established names with strong cash flows and outlooks.”
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