Atlas Lithium Corporation: Buying The Lithium Dip

seekingalpha09-11

Lithium prices have plunged nearly 90% from their 2022 highs, presenting a potential value-based investment opportunity as commodity cycles suggest a price bottom.Atlas Lithium Corporation is ...

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shares at current low prices.Just_Super Lithium is the alkali metal with the lowest density, the most significant electrochemical potential, and the highest energy-to-weight ratio. Lithium's low atomic weight and the small size of its ions speed its diffusion, making it an ideal battery material. Lithium-ion batteries are critical for electric vehicles and green energy technologies. Atlas Lithium Corporation (NASDAQ:ATLX) is a Brazilian mineral exploration and development company. ATLX's company profile states: ATLX Company Profile (Seeking Alpha) Lithium prices and ATLX shares have declined since reaching highs in 2022 and 2023. Commodity cyclicality could lead to recovery over the coming months and years, and now could be the perfect time to put ATLX on your investment radar. Lithium prices have plunged Lithium prices peaked in late 2022 at over $80 per kilogram. Long-Term Lithium Price Chart (dailymetalprice.com) The chart shows that the over 88% plunge to the $10 level in early September 2024. The steep decline is due to the slow growth of electric vehicle sales in China, caused by the slowdown in the Chinese economy. Meanwhile, lithium production has skyrocketed over the past years. Worldwide lithium Mine Production 2010-2023 (Statista) The chart shows that lithium production has soared over the past years. Weak Chinese demand and soaring output have caused lithium prices to plunge. Commodities are cyclical Commodities are global assets that experience pricing cycles. During bull markets, prices rise to unsustainable levels as producers increase output, inventories begin to rise, consumers curb purchases, and prices run out of upside steam. We witnessed this phenomenon in the lithium market when prices reached record highs in 2022. We are now in the midst of the downside of the pricing cycle when prices fall to levels where production slows, inventories begin to decline, and consumers increase purchases because of the lower prices. Lithium is likely to find a price bottom after the nearly 90% decline. One-Year Chart of Lithium Prices (dailymetalprice.com) The one-year chart highlights that lithium prices continue to make lower lows; they were mostly between $10 and $15 per kilogram in 2024. Commodity cyclicality suggests that lithium is at a price bottom where production will decline, inventories will begin to drop, and consumers will take advantage of the low prices. A recovery in China's economy could accelerate the price cycle over the coming months. Buying when prices stabilize near the lows tends to be the optimal value-based approach Warren Buffett is widely considered the most outstanding value and long-term investor. Some of his most notable quotes about the subject include: Price is what you pay; value is what you get. Someone's sitting in the shade today because someone planted a tree long ago. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. The stock market is a device for transferring money from the impatient to the patient. Lithium's substantial decline has created significant fear. However, lithium requirements for lithium-ion batteries for EVs and other climate change initiatives will continue over the coming years. The trend is always your best friend in markets, and while the path of least resistance of lithium prices remains lower, the demand trends suggest the price is at or near the bottom. The Growth of Lithium Consumption (visualcapitalist.com) While worldwide lithium production has grown over the past decade and a half, consumption has kept pace with the output. Warren Buffett's investing approach centers on companies in the stock market. Commodities are global assets with specific supply and demand fundamentals. Value investing in commodities relies on the asset class's cyclical nature. Many examples of raw materials have reached price nadirs and peaks over the past decades. Moreover, prices tend to rise and fall to illogical, irrational, and unreasonable levels that defy fundamentals during bull and bear markets. Lithium's rise to the 2022 high was an example of the upside price action, and the current decline could be equally reflective of the bottom end of the price cycle. Commodity production and exploration companies move higher and lower with the raw materials they extract from the earth's crust. They often underperform the commodity when prices fall and outperform on a percentage basis when prices rise. ATLX is a Brazilian lithium company moving from exploration to production At just over $9 per share, Atlas Lithium Company has around a $138 million market cap. The company trades an average of 35,157 shares daily and pays no dividend. Lithium prices rose to highs in late 2022 as the prospects for EV sales peaked. The bullish price action in the commodity pushed ATLX shares to the most recent high in May 2023. Three-Year Chart of ATLX Shares (Barchart) As the chart shows, ATLX shares reached $45 in May 2023, but they ran out of upside steam, falling to the most recent $8.37 low on August 12, 2024. Like lithium, ATLX shares remain in a bearish trend in September 2024. The company's website details its projects and properties:  The Minas Gerais Lithium Project has 85 mineral rights, including seven main clusters of prospective mineralization in the state of Minas Gerais, Brazil. The mineral rights are adjacent to or near sizeable existing lithium deposits belonging to an established publicly traded commodity producer. ATLX owns 100% of early-stage projects and properties in other battery supply chains and high-technology minerals, including nickel, cobalt, rare earth metals, titanium, and graphite. These properties are in the Brazilian states of Piaui and Goias. ATLX owns 59% of Apollo Resources, focused on iron ore in Minas Gerais. Apollo currently owns 57.665 acres of mineral rights for iron in six projects in the Iron Quadrangle mining district. ATLX owns 28% of Jupiter Gold, that owns the Alpha Gold Project in Minas Gerais, the leading gold-producing Brazilian state.  The company's most recent press releases include:  Recognition for plant design and sustainability. Progress on ATLX's modular lithium processing plant using dense media separation or DMS. A doubling of the size of ATLX's lithium exploration footprint in Brazil.  While lithium prices remain under pressure and near lows, ATLX is building its Brazilian footprint and exploration and production infrastructure for when prices recover. A high-profile Japanese investment Mitsui and Company is a business investment, project development and management, and capital goods leasing, and technology transfer company. It is also involved in importing, exporting, offshore trade, and domestic wholesale. Mitsui's traditional business is as a Sogo Shosha, Japanese for a general trading company. Mitsui is a leading commodity trading house that has been around since 1947. In 2019, Warren Buffett began buying Japanese stocks, including Mitsui. Buffett's Berkshire Hathaway's wholly owned subsidiary, National Indemnity Company, presently owns around 9% of Mitsui and other Japanese trading companies, including Mitsubishi, Itochu, Sumitomo, and Marubeni, according to June filings. Atlas Lithium has a definitive investment and offtake agreement with Mitsui, which gives Mitsui a significant stake in the development of the exploration and mining company. The deal entails Mitsui's purchase of $30 million in common ATLX shares at a 10% premium to the company's five-day volume-weighted average, providing the company with immediate funding. Under the agreement, Mitsui will acquire 15,000 tons of lithium concentrate from Phase 1 and 60,000 tons per year for five years from Phase 2 of Atlas Lithium's Neves Project in Minas Gerais, Brazil. Mitsui's investment is a giant step, enabling ATLX to expedite its development towards production and revenue generation. I have been trading commodities since the early 1980s, and one of the significant differences between trading companies and investors in the U.S. and Europe and their Japanese counterparts is patience. Japanese companies are under different quarter-to-quarter earnings pressures than their U.S. and European competitors. Warren Buffett's investment in Mitsui and other Japanese trading houses reflects his patience and his quote: The stock market is a device for transferring money from the impatient to the patient. Mitsui's interest and investment in ATLX provide comfort for investors, as the Japanese trading house has likely done significant due diligence on the company's projects and its success potential. Moreover, Mitsui is investing in lithium after the price plunge, understanding commodity price cycles and the underlying fundamentals of the lithium market. Mining companies provide leverage to the underlying commodities - ATLX could be the optimal vehicle for a lithium investment at or near the bottom of the pricing cycle Mining companies tend to do better than the underlying commodities they extract from the earth's crust on the upside and worse on the downside. It is virtually impossible to pick tops or bottoms in stocks, commodities, or any assets during bullish or bearish trends, as prices can rise or fall to irrational, unreasonable, and illogical levels that defy fundamental and technical analysis. At the $9 level on ATLX share and the $10 per kilogram level on lithium prices, the prices could move lower, as the bearish trends are always our best friends. However, lithium and ATLX could be textbook buying opportunities from a value perspective, as lithium is closer to zero than the 2022 high. A recovery in China's economy could cause lithium to recover as ATLX prepares to expand its Brazilian lithium footprint. Brazil is the world's fifth-leading lithium-producing country. Brazil has the seventh-leading lithium reserves at 390,000 tons.  Meanwhile, Warren Buffett is the world's top value investor, and has significant holdings in Mitsui, a leading Japanese trading house. Mitsui has invested in Atlas Lithium Corporation as lithium prices are at the bottom of the commodity pricing cycle. While the shares are at the $10 level and could decline, this could be the perfect time to start accumulating ATLX shares, leaving plenty of room to add on a scaled-down basis. Mitsui's investment is a compelling reason to consider this lithium exploration and production company in a market that could have substantial upside potential.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2466460436"}