Choose Lithium Americas over Ballard Power, this investor says

Ballard Power Systems (Ballard Power Systems Stock Quote, Charts, News, Analysts, Financials TSX:BLDP) has come a long way down over the past six months, enough to maybe make the stock look cheap. But investors looking for a play in the battery and renewable tech space might be better off going for a Lithium Americas (Lithium Americas Stock Quote, Charts, News, Analysts, Financials TSX:LAC), says portfolio manager David Burrows.

“You can fit them all into the alternative energy space, but they’re obviously very different companies. In particular, if I had to pick a spot, I would pick lithium as a material and the lithium producers as being more timely,” said Burrows, chief investment strategist at Barometer Capital Management, who spoke on BNN Bloomberg on Thursday.

Early in its days, Ballard Power began as a lithium power research company but that was decades ago and since then the company has shifted focus to hydrogen fuel cell technology, developing now its proton exchange membrane (PEM) fuel cells for use in heavy transportation vehicles like buses and trucks, areas that are less friendly to today’s main alternative energy source, lithium-ion batteries.

And while Tesla and the rest have put their money on lithium ion batteries, Ballard is continuing its R&D in hydrogen, gaining contracts and developing partnerships along the way. 

Earlier this month, Ballard announced a collaboration with German electric vehicle company Quantron AG to develop and commercialize EV tech related to Ballard’s FCmove heavy-duty fuel cell power modules, with the aim being to manufacture fuel cell electric trucks for the German market.

“The combination of both companies’ expertise will deliver high performance hydrogen trucks to respond to the growing demand for zero emission vehicles from fleet operators and unlock new business opportunities for medium and heavy-duty fuel cell trucks in Germany,” said Robert Campbell, Chief Customer Officer of Ballard Power Systems, in a September 7 press release. 

“Ballard is bringing its eighth generation of heavy-duty fuel cell power module experience built upon over 85 million km’s of road service from over 3,500 buses and trucks powered by our leading PEM technology today,” he said.

As a public company, Ballard has had its share of ups and downs, most recently on display over the past year and a half where the stock went from just under $10 a share at the start of 2020 to as high as $52 by February of this year. What came next was a just-as-quick pullback, however, bringing the stock to $20 by May. From there, BLDP has barely moved over intervening months. 

By contrast, the lithium power space had a bit of a breather like the rest of the renewable energy sector in February and March of this year but has since motored ahead, leaving other renewables in the dust.

The Global X Lithium & Battery Tech ETF (Global X Stock Quote, Charts, News, Analysts, Financials NYSE:LIT), for example, which attempts to track the global lithium market as a whole, dropped from about $62 at the start of the year to about $59.50 by March but has since climbed to the $83 range. 

For a Canadian piece of the lithium pie, Vancouver-based Lithium Americas, which has lithium mining projects in Argentina and Nevada, is now up 70 per cent for 2021 and has an 18-month return of a huge 645 per cent.

And even with all those gains, Burrows still thinks LAC is a better bet than Ballard.

“Certainly, Ballard’s technology is having some adoption, but the market doesn’t seem to care right now. They had a great run into the early part of 2021 as many small and mid-cap companies in the alternative energy space did well,” Burrows said.

“But whether you own the LIT, the lithium ETF, which has a basket of companies from this space, or a company like Lithium Americas or some of the larger producers, I think there’s going to be pretty steady demand. There’s going to be additional production that’s going to come on but the demand is going to be solid for quite some time, so I would rather own Lithium Americas over Ballard at this point,” he said.

Lithium Americas’ Argentina project, which is due to start production in the middle of next year, is being developed jointly with global powerhouse in the sector Ganfeng Lithium, with LAC also announcing in July an investment in another Argentina-based lithium mining company, Arena Minerals, which also has an investment from Ganfeng.

“We look forward to working with Arena Minerals and Ganfeng to support the pursuit of resource exploration opportunities in Argentina,” commented Jon Evans, President and CEO of Lithium Americas, in a press release. “This investment will allow Lithium Americas to advance our long-term resource development plans, while maintaining our team’s focus on execution at Caucharí-Olaroz and the Thacker Pass project.”

Another publicly traded Canadian lithium company with recent news would be Standard Lithium (Standard Lithium Stock Quote, Charts, News, Analysts, Financials TSXV:SLI), which is commercializing a lithium extraction model currently being tested in El Dorado, Arkansas. The company recently announced a new pilot project on carbon capture and storage in collaboration with Norwegian company Aqualung. 

Year-to-date, the Global X Lithium & Battery Tech ETF is currently up 34 per cent, while since the start of 2020 the stock is now up 203 per cent.

Disclaimer: Standard Lithium is an annual sponsor of Cantech Letter.