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Whether you’re an avid environmentalist or an electric car enthusiast, the current state of the lithium industry is alarming. This is due to the commodity lithium’s dire impact on the landscape and its poor performance. After all, lithium wasn’t necessarily the most exciting material for investors, as it supported a stable smartphone and rechargeable battery industry. However, over the past decade, new electric vehicles have entered the consumer market and the lithium mining sector has boomed. Now that the market has gone through some correction, there are some lithium stocks to avoid compared to others.
With margins from lithium mining shrinking, mining companies that have not reined in operating spending could be among the first to act if a broader market meltdown occurs. Therefore, investors may want to avoid investing in these three lithium stocks with poor prospects for next year.
Rheolithium (LLLAF)
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rheolithium (OTCMKTS:LLLAF) once represented a pure play in West African lithium mining, but as of May 8, its future appears uncertain. That’s because the company’s only mining operations were focused on developing the Gramina lithium project in Mali.
However, the company later announced that it would sell its remaining 40% stake in the project to a joint venture partner. Ganmine Lithium (OTCMKTS:Gunneff), the company seems to have raised expectations among investors. As a result of the sale, the company will receive $342.7 million, of which $60 million must be delegated to the Malian government to fulfill the original contract for the mine.
This last part appears to have driven Leo Lithium out of Mali, as it was trying to reach a “workable agreement” with Mali over new mining laws. Before the law reform, the Malian government’s stake was 20%, but it has now increased to 30%, with an additional 5% going to local Malian companies. With no clear mine replacement in sight, investors should consider LLLAF among the lithium stocks to avoid.
Galan Lithium (GLNLF)
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In some cases, the numbers convey a warning, even if the news isn’t all that exciting.This may be the case galan lithium (OTCMKTS:GLNLF) is experiencing an increase in operating costs as its revenue declines. The company’s year-to-date profit and 12-month profit are both significantly negative.
For example, if you invested $1,000 in Gallon Lithium at the beginning of 2024, you would only be left with $511 because the company’s stock lost 49.9% of its value in just five months.
This financial position comes despite the company’s strong position in the Argentine region of South America’s Lithium Triangle. Galan Lithium, which touts these deposits as some of the purest in the world, has not made a profit in the past four quarters. Therefore, investors should add Galan Lithium to their list of lithium stocks to avoid until the company shows solid profits.
Ganmine Lithium (GNENF)
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Ganfeng Lithium, a major player in China and the global lithium market, may be short on jobs. As previously mentioned, the company acquired Partner’s interest in his Leo Lithium project for $342.7 million. This spending will likely reduce short-term cash reserves, which could be difficult for Chinese companies.
Mali’s government’s new legal requirements and relative instability could be detrimental to Ganfen. Armed groups are carrying out terrorist attacks across Mali, and the situation for miners and developers in the region could deteriorate rapidly.
Furthermore, the European Union has decided to no longer support the task of training the Malian army. This will likely only worsen the conflict situation. Ultimately, investors may want to avoid Ganfeng until the lithium business in Mali matures.
On the date of publication, Viktor Zarev did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer and are influenced by InvestorPlace.com. Publishing guidelines.
