These UK lithium shares have jumped over 50% already in 2023! Time to buy?
A common investing theme for the coming years is likely to be alternative energy sources. With growing demand for battery materials as electric vehicle use increases, it seems likely that lithium shares will remain in the spotlight.
One UK-listed share that could offer me exposure to lithium is Kodal Minerals (LSE: KOD). Its shares have leapt just over 50% so far in 2023 as I write this on Thursday. That sort of explosive price growth sounds intriguing. Could this be a smart purchase for my portfolio?
Share price jump
A quick look at the chart shows that the company’s share price has moved around a fair bit.
Although it has leapt in 2023, over the past 12 months it is up 25%. That is still modest, although attractive to me. On a five-year basis, the shares would have more than doubled my money. But they are still less than half of where they were back in 2014.
Reasons for the surge
The main driver for the recent increase in the share price is a funding package it announced last month.
Kodal has secured a conditional package of $118m that the firm says “will provide full financing for the development and commencement of production at the Bougouni Lithium Project in Mali”, as well as supporting a major exploration and development programme.
That could be transformative for the business. The Bougouni project in west Africa is Kodal’s flagship asset. This deal with Chinese company Hainan Mining will help Kodal recover the costs it has put into developing the project and let it expand its portfolio of potential projects. That could turn out to be very lucrative for shareholders in future.
Digging into the deal
Hainan Mining is a subsidiary of Chinese giant Fosun. Chinese industry has high demand for lithium.
This deal reminds me of a situation with some other UK lithium shares in 2021. Back then, Ganfeng Lithium built a stake in London-listed Bacanora Lithium. It later successfully made a full takeover offer, at a premium to the prevailing share price.
There is no guarantee that the same thing will happen with Kodal. But I think it may.
Under the recently announced deal, Hainan basically gets a 51% share of a new Kodal subsidiary focused on developing Bougouni. If it likes what it sees as things develop, Hainan may decide it wants the whole pie.
Should I buy?
Despite that, I will not be investing in these penny shares.
I am a long-term investor. So I do not buy in anticipation of an event like a takeover, but rather try to identify brilliant businesses that trade at an attractive valuation.
Bougouni seems like a promising development and the Hainan deal could turn out to be good news for Kodal. But the latter lacks substantial diversification and does not generate any revenues yet. Early stage mine development can be fraught with disappointment and costly setbacks.
The risks are too high for my tastes. I will keep hunting for lithium shares I can add to my portfolio. But I will not be buying Kodal at the moment.
The post These UK lithium shares have jumped over 50% already in 2023! Time to buy? appeared first on The Motley Fool UK.
Should you invest £1,000 in Kodal Minerals Plc right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
Mark and his analyst team just revealed what they believe are the 6 best stocks for investors to buy right now… and Kodal Minerals Plc wasn’t on the list. Right now, they think there are 6 stocks that are better buys!
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
- I’d buy 6,477 shares of this stock for £100 in monthly passive income
- Lloyds shares are up over 10% in 2023! Is it time to buy?
- If I’d invested £500 in easyjet shares 3 years ago, here’s what I’d have now
- Earnings: time to buy Centrica shares after bumper profits?
- Can the London Stock Exchange share price multi-bag again?
C Ruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.