Stock Market Crash Warning: Don’t Let These 3 Lithium Stocks Surprise You

Lithium Stocks to Avoid - Stock Market Crash Warning: Don't Let These 3 Lithium Stocks Surprise You

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Whether you’re a staunch environmentalist or an electric vehicle enthusiast, the current state of the lithium industry is concerning. This is due to lithium’s disastrous impact on landscapes and its poor performance. For investors, lithium hasn’t always been the most exciting play, after all, it has supported the stable smartphone and rechargeable battery sector. Yet over the past decade, new electric vehicles have entered the mainstream market, sparking a boom in the lithium mining industry. Now, after some correction in the market, there are some obvious lithium stocks to avoid over others.

With lithium mining profit margins shrinking, mining companies that don’t control their operating expenses could be the first to leave in the event of a broader market collapse. So, investors may want to avoid investing in these three lithium stocks with slim prospects for the coming year.

Lion Lithium (LLLAF)

a lithium mine, ATLX stock.  Lithium Stocks to Buy

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Lion Lithium (OTCMKTS:LLLAF) once represented a pure player in lithium mining in West Africa, but as of May 8, its future appears uncertain. Indeed, its only mining operations have focused on the development of the Goulamina Lithium project in Mali.

However, it has since announced the sale of its remaining 40% stake in the project to its joint venture partner, Ganfeng-Lithium (OTCMKTS:GNENF), the company seems to have left investors wanting more. From this sale, the company will receive $342.7 million, of which it will have to delegate $60 million to the Malian government to honor its initial contract on the mine.

This last part appears to be what caused Leo Lithium to leave Mali, as the company attempted to reach a “viable agreement” with Mali due to its new mining codes. Before the legal changes, the Malian government held a 20% stake, with this now increasing to 30% with a further 5% going to a local Malian entity. With no clear mining replacement in sight, investors should consider LLLAF among the lithium stocks to avoid.

Galan Lithium (GLNLF)

lithium (LI) on the periodic table.  best performing lithium stocks

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Sometimes numbers can serve as a warning without bringing exciting news. This is the case of Galan-Lithium (OTCMKTS: GLNLF), which is seeing its operating costs increase alongside a decline in revenue. The company’s year-to-date and 12-month returns are significantly negative.

For example, if you had invested $1,000 in Gallon Lithium in early 2024, you would only have $511 because the company’s shares have lost 49.9% of their value in just five months.

These financial results come despite the company’s strong position in the Argentine part of South America’s lithium triangle. Galan Lithium claims these deposits are among the purest in the world, yet has not generated a profit over the past four quarters. As such, investors should put Galan Lithium on their list of lithium stocks to avoid until the company has solid earnings to show for it.

Ganfeng Lithium (GNENF)

Person holding cell phone with logo of Chinese company Jiangxi Ganfeng Lithium Co. Ltd.  (GNENF) on the screen in front of the web page.  Focus on the phone screen.  Unedited photo.

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A major player in the Chinese and global lithium markets, Ganfeng Lithium could have its work cut out for it. As mentioned earlier, the company acquired the stake in the project from its partner Leo Lithium for $342.7 million. These expenses will likely reduce its cash reserves in the short term but could prove tricky for the Chinese company.

Indeed, the Malian government’s new legal requirements and its relative propensity for instability could result in a loss for Ganfeng. As armed gangs terrorize large swaths of territory across Mali, the situation for miners and developers in the region could deteriorate rapidly.

Furthermore, the European Union has decided to no longer support the Malian military training mission. This will probably only make the conflict situation worse. Ultimately, investors may want to avoid Ganfeng until its Mali lithium project matures.

As of the date of publication, Viktor Zarev did not hold (neither directly nor indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to Publishing Guidelines.

Viktor Zarev is a scientist, researcher and writer specializing in explaining the complex world of technology stocks with a focus on accuracy and understanding.