Compass Minerals International (NYSE:CMP) stock soared this morning, up as high as 17.9% as of 9:40 a.m. EDT. The otherwise uninteresting company, which largely deals in salt and plant fertilizers, has discovered a breakthrough that could change its fortunes.
At its solar evaporation location in Ogden, Utah, Compass Minerals announced the finding of a lithium brine resource with over 2.4 million metric tons of lithium carbonate equivalent (LCE) on July 13. According to the World Bank, the total identified lithium resources in the United States are roughly 7.9 million tons. The primary source of lithium is brine, which is seawater with a high percentage of lithium carbonate.
Compass Minerals also announced that it is nearing a deal with a lithium extraction partner and is already evaluating possibilities for converting resources to lithium hydroxide, which is used in lithium-ion batteries.
“In a market hungry for domestically sourced lithium produced with minimal environmental impact, we believe a sustainable and readily available lithium resource like we have defined at our operations on the Great Salt Lake could be a true differentiator for our company.”
– CEO, Kevin S. Crutchfield
The enthusiasm of management is well-founded. Compass Minerals plans to manufacture 20,000 to 25,000 metric tons of battery-grade lithium LCE per year. According to the International Energy Agency, demand for lithium-ion batteries has risen in tandem with demand for electric vehicles, with worldwide electric car sales increasing by 41% in 2020 despite the global car market being impacted by the COVID-19 epidemic (IEA). Between 2020 and 2025, Albemarle, the world’s largest lithium producer, expects demand for battery-grade lithium to grow at a compound annual rate of 47 percent.
Is Compass Mineral a good investment?
Yes, investors should now focus on the company’s plan for maximizing the value of the lithium asset. It could necessitate significant capital expenditure and force management to divest more non-core assets to obtain funds while reducing debt, comparable to its recent $432 million sale of its specialty plant nutrition business in South America.
Lithium is a promising growth story for Compass Minerals, especially as its discovery coincides with President Joe Biden’s goal of quadrupling sustainable energy’s electricity share in the United States by 2030.
