Having fallen 51% over the previous 12 months, Atlantic Lithium‘s (LSE:ALL) share value stays locked in a downtrend that began in 2022. Lithium shares like this have been underneath extreme stress of late as costs of the silvery-white metallic have plummeted.

Indicators of rising oversupply have pushed lithium costs to their most cost-effective since July 2021. Weaker-than-expected electrical automobile (EV) gross sales have brought about inventories to construct. And buyers are nervous that costs may stay depressed as new provide enters the market and EV gross sales gradual (particularly in China).

However may Atlantic Lithium shares now be a intelligent purchase at present costs?

Reward vs danger

Atlantic Lithium owns the Ewoyaa lithium undertaking in Ghana. It has designs on getting first materials out of the bottom in 2025, and is making a superb fist of getting this achieved.

As a possible investor I’m acutely aware of additional value weak point if lithium costs proceed sinking. That is half and parcel of buying shares in any commodities inventory.

But the potential long-term rewards of proudly owning this former penny inventory stay vital. That is because of the huge potential of its Ghanian property, which was underlined in contemporary drilling information on Monday.

Thrilling outcomes

In line with Atlantic, most up-to-date exploration work in 2023 revealed “a number of high-grade and broad extensional drill intersections” on the Canine-Leg goal, in addition to the corporate’s Okwesi, Anokyi, and Ewoyaa-South 2 deposits.

Atlantic mentioned that the outcomes at Canine-Leg alone present potential for “vital useful resource development“. The entire outcomes are exterior of the mineral useful resource of 35.3m tonnes at 1.25% lithium oxide for Ewoyaa.

In good condition

Immediately’s (5 February) replace is the most recent in a string of constructive drilling studies from the lithium enterprise. Exploration work may be troublesome and fraught with disappointment, however up to now Atlantic has a robust observe report on this entrance that offers me confidence.

I additionally like this specific lithium miner as a result of it’s in good monetary form to get Ewoyaa off the bottom. A stable steadiness sheet provides it extra wiggle room if any operational issues come up and thus reduces the danger to buyers.

Piedmont Lithium has vowed to cowl $70m of an estimated $185m to develop the monster asset. It’s going to additionally maintain 50% of any further prices that spring up. Moreover, Ghana’s sovereign wealth fund introduced final September plans to speculate $32.9m within the undertaking.

The decision

As I say, lithium consumption has been within the doldrums not too long ago, a growth that displays the impression of upper rates of interest and China’s turbulent financial system. These may stay issues for metallic demand in 2024 too.

However the long-term outlook for lithium utilization stays fairly stable. EV gross sales are nonetheless tipped to rise strongly within the subsequent 10-20 years as decarbonisation initiatives intensify.

And Atlantic Lithium — whose Ewoyaa undertaking is among the largest lithium deposits on the planet — could possibly be effectively positioned to capitalise on this. I’ll be trying so as to add the corporate to my very own portfolio once I subsequent have money to speculate.