Lithium prices continue to remain steady as the lithium mining industry hopes for better times. However, the recent first-quarter results from the Chilean lithium major, Sociedad Química y Minera de Chile SA (NYSE:SQM), fail to echo that sentiment. Meanwhile, shares of Lithium Americas (NYSE:LAC) (TSE:LAC are under pressure amid new short-seller action.
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SQM’s Dismal Q1
The world’s second-biggest lithium miner, SQM, swung to an $870 million net loss for the first quarter as elevated supply weighed on prices. The company reported a net loss per share of $3.04 for the quarter compared to a net profit per share of $2.63 a year ago. Moreover, its top line plunged to $1.09 billion from $2.26 billion a year ago.
This dismal performance came despite SQM clocking higher volumes in Q1. While the results point to the continued impact of lower prices, SQM is working towards ramping up its lithium carbonate capacity to 240,000 metric tons annually next year. It also plans to expand its lithium hydroxide capacity to 100,000 metric tons per year from the present 40,000 metric tons.
Short Seller Action in LAC
In another development, Lithium Americas shares tumbled by nearly 13% this week after a short report from Bleecker Street Research. Bleecker believes that LAC is pursuing a “futile mining method” that “will not work.” LAC plans to develop the Thacker Pass mine to become one of the largest lithium producers globally.
The Thacker Pass project is the largest known Measured and Indicated (M&I) lithium resource in North America, and LAC expects major construction at Thacker Pass to begin in the second half of this year. The company has also received a conditional commitment for a $2.26 billion loan from the U.S. Department of Energy (DOE) to set up processing facilities at Thacker Pass. The first phase of the project is expected to produce around 40,000 tons of battery-grade lithium carbonate annually.
However, Bleecker believes that the project is uneconomical and current LAC investors may witness substantial dilution of their holdings. Bleecker is also short on LAC stock.
What Is the Prediction for LIT ETF?
Both SQM and LAC shares have tumbled by double digits so far this year. The Global Lithium & Battery Tech ETF (LIT), at $43.85 per share, is also down by nearly 14% year-to-date. This underperformance could potentially continue amid the current not-so-promising environment for the lithium industry.
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