Best 10 ASX lithium stocks to watch

ASX lithium stocks: what you need to know

Lithium is a silvery-white alkali metal, with special properties that make it extremely useful in the production of lithium-ion batteries that act as the power source for Electric Vehicles.

Because lithium is both the least dense metal and least dense solid element, it is highly unlikely to be replaced in modern EVs by alternatives such as nickel. While nickel has been used in the past, it has 40% lower energy density, meaning more of the metal is required to create an EV battery.

However, lithium’s chemical disadvantage is its inherent instability. Lithium is highly reactive and must be stored in an inert atmosphere or vacuum such as oil. This makes it expensive to produce, transport, and store.

As the Electric Vehicle revolution gathers pace, by dint of the increasingly scarce and costly oil, or because of environmental concerns, lithium mining is likely to become ever more profitable in the long term.

Of course, it does come with significant environmental concerns of its own, which the industry is taking steps to address.

Best 10 ASX lithium stocks to watch

1) Mineral Resources (ASX: MIN)

Mineral Resources operates a growing world-class portfolio of operations across multiple commodities but its core activities are iron ore and lithium mining throughout Western Australia and the Northern Territory.

Key sites include Wodgina Lithium, which as one of the largest hard-rock lithium deposits in the world is expected to have a 30-year mine life. It now operates the project as joint partners with US giant Albemarle, and also owns 50% of the Mount Marion lithium project in partnership with Ganfeng Lithium.

Its diversification into iron ore and partnerships with global players makes MIN a safer choice for risk-averse investors.

2) Pilbara Minerals (ASX: PLS)

Pilbara Minerals is ‘ready for the global energy transformation,’ and well-positioned to be a low-cost, long-term sustainable lithium producer. It describes itself as the ‘leading ASX-listed pure-play lithium company, owning 100% of the world’s largest, independent hard-rock lithium operation.’

Its Pilgangoora mine in the Pilbara region produces both spodumene and tantalite concentrate, and it counts Ganfeng Lithium and General Lithium as partners. The miner has long been seen as the trailblazer for Australia's lithium boom.

The company’s long-term strategy is to become an ‘integrated lithium raw materials and chemicals supplier in the years to come,’ in an attempt to be a major player in the lithium supply chain, underpinned by increasing demand for clean energy technologies.

3) Allkem (ASX: AKE)

Allkem was formed from the merger of two lithium giants, Orocobre and Galaxy Resources, and now controls a global portfolio of diverse, high-quality lithium chemicals. Headquartered in Buenos Aires, it operates lithium projects across Argentina, Australia and Japan, with development underway to meet significant expected market growth.

The company plans to expand production 3-fold by 2026, mining 10% of the world’s lithium over the next decade. Production of lithium hydroxide at its new plant in Japan has now begun.

Allkem recently agreed an AU$15.7 billion merger with Livent, which will create a lithium titan – and recently received regulatory approval.

4) Liontown Resources (ASX: LTR)

Liontown Resources aims to ‘find, develop and supply battery minerals required by the rapidly growing Electric Vehicle and Energy Storage industries.’

It controls two lithium deposits in Western Australia and is expanding its portfolio through additional exploration, partnerships, and acquisitions. Its cornerstone is the Kathleen Valley project, one of the world’s largest and highest-grade hard rock lithium deposits.

The project is expected to supply 500,000 tonnes of 6% lithium oxide concentrate per year when production starts in Q2 2024, with a mine life of 23 years. The explorer recently won backing from a coalition of Australian, South Korean, and US government finance agencies for much of the $895 million needed to bring Kathleen to production.

Liontown was the subject of Albemarle takeover interest for much of 2023, though this was scuppered by Gina Rinehart, who has taken a sizeable position in the company.

5) Sayona Mining (ASX: SYA)

Sayona Mining is an emerging lithium producer with projects in Quebec, Canada and Western Australia. It’s in a strategic partnership with Piedmont Lithium in Quebec, where it owns 75% of North American Lithium and Piedmont the remaining 25%.

And it plans to integrate nearby Authier and Tansim projects, as well as its 60% ownership of the Moblan project, to create a world-scale hub. The miner is ‘committed to downstream processing in Quebec to supply the fast-growing North American battery and EV market.’ It also holds a large tenement portfolio in Western Australia for gold and lithium.

6) Core Lithium (ASX: CXO)

Core Lithium is developing one of Australia’s most capital-efficient spodumene lithium projects, the Finniss Project in the Northern Territory. The prospector’s definitive feasibility study concluded that the mine has 173,000tpa of lithium concentrate, with a 10-year mine life, and the original estimate has been upgraded by 62% to 30.6MT at 1.32% lithium oxide.

Finniss is now producing, with its first sale having been announced in November 2022, while shipments began in May 2023.

A key advantage is that the mine has ‘arguably the best supporting infrastructure and logistics chain to Asia of any Australian lithium project.’ It’s only 88km from Darwin Port, the closest port to Asia.

However, investor concerns have been growing given the share price movement in 2023 — but the company is profitable and debt-free.

7) Lake Resources (ASX: LKE)

Lake Resources is a lithium developer which uses proprietary clean extraction technology to create high-purity battery quality lithium carbonate. Its tech partner, Lilac Solutions has designed a ‘benign water treatment’ which returns all water (brine) to the source without changing its chemistry, making it far more environmentally friendly than conventional brine evaporation or hard rock mining. Independent testing of the novel treatment has been positive thus far.

LKE’s flagship Kachi project together with three other lithium brine projects in Argentina covers 2,200 square km in a prime location in the lithium triangle, where 40% of the world’s lithium is produced at the lowest cost.

However, shares are falling after it announced that its 50,000tpa production target at Kachi will both cost far more than previously expected, and also take until 2030 - six years after the original 2024 guidance date.

8) Piedmont Lithium (ASX: PLL)

Piedmont Lithium aims to ‘develop a world-class integrated lithium business in the United States.’ It owns interests in the Carolina Tin Spodumene Belt in North Carolina, ‘the cradle of the lithium industry.’ The miner could become one of the lowest-cost producers of lithium hydroxide and is strategically placed to insert itself into the US electric vehicle supply chain.

Alongside its partner Sayona, it’s also developing interests in Quebec which have very recently seen first production.

9) Ioneer (ASX: INR)

Ioneer is expected to be the first new lithium chemical producer in the US in over 60 years. The miner owns a 100% interest in the Rhyolite Ridge Lithium-Boron project in Nevada, the only known lithium-boron deposit in North America, and one of two in the world.

In its 2020 feasibility study, it confirmed the site as a world-class project with a globally significant deposit that could set it up as a major lithium supplier for decades. The company recently upgraded the lithium carbonate equivalent resource estimate by 168% to 3.4MT.

It’s signed a deal to supply NexTech batteries from the mine and has been given a US$700 million US Department of Energy loan.

10) Latin Resources (ASX: LRS)

Latin Resources is a mineral exploration company which focuses on developing assets in commodities that will contribute to global net zero emissions. Its flagship project is the Colina Lithium Project in Brazil, which has a Mineral Resource Estimate of 45.2Mt @ 1.34% Li2O — and with tenements covering over 38,000 hectares, there could be significant expansion in time.

The company also has several other mineral assets to its name.

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ASX lithium stocks: further important information

The best current alternative to lithium is nickel-based batteries. But lithium batteries charge quicker, and have no memory issues, meaning their maximum charging capacity isn’t affected by each charging cycle. And nickel batteries run hotter quicker, so usually require a cooling system.

On the other hand, lithium’s instability makes it around 50% more expensive to manufacture lithium batteries, which impacts the cost of an EV. Lithium batteries also usually have a shorter shelf life than nickel batteries before needing replacing. And because nickel is used more widely, the metal can already be recycled profitably.

But fundamentally, lithium is likely to be the metal that will power the EV revolution, unless there is a giant technological leap forward.

And to understand the potential the EV revolution has, market leader Tesla’s market cap, while volatile, currently hovers around $900 billion, comparable to the sum of every other auto manufacturer in the world combined. And it produced less than one million vehicles in 2021, while the OICA estimates 57 million passenger cars were produced in total.

Indeed, in the past CEO Elon Musk has likened lithium mining to ‘minting money,’ and has hinted plans to start his own lithium company to gain some control of the supply chain.

The global shortage pushed lithium prices beyond record levels in 2022, threatening to arrest its so far rapid growth. However, prices have fallen back sharpy in 2023 as supply begins to catch up, Chinese demand falters, and the world teeters on the brink of global recession.

According to the IEA, the number of EVs produced more than doubled in 2021 to 6.6 million. Analysts expect lithium demand to increase tenfold by 2030, as legislation prohibiting the manufacture or sale of ICE cars in the future is being passed across vast swathes of the world, including in the EU, UK, USA, and even China.

Currently, China controls 80% of battery cell production and maintains a market-leading position in lithium refining. The war in Ukraine, combined with the Shanghai pandemic lockdown has forced companies worldwide to examine the strength of supply chains and perhaps pay more for higher security of supply.

Already, US President Biden has invoked emergency Presidential powers under the Cold-War era 1950 Defense Production Act. He aims to increase production of key metals including lithium, ‘to reduce our reliance on China and other countries for the minerals and materials that will power our clean energy future.’

Further demand is likely to be awoken by the recently passed Inflation Reduction Act, which offers $370 billion of investment into clean energy including extending the $7,500 consumer income tax credit for the purchase of a new EV, and eliminating the per-manufacturer limit on these tax credits.

One lithium concern is that it is relatively abundant worldwide. However, supply is restricted for two reasons. The first is that it needs to lithium needs to be concentrated enough to be worth mining and exploratory projects are often expensive with a high failure rate.

The second is that lithium is difficult and time-consuming to mine, with new mines taking up to ten years to begin extraction. While corporations worldwide are trying to set up their own mining and processing operations. the demand for lithium is likely to eclipse the supply ramp-up. The International Energy Agency (IEA) estimates that demand for lithium will rise by 900% by 2030, and by 4,000% by 2040.

Of course, lithium prices are as volatile as the metal itself. For example, a recent influencing factor is China’s ‘zero-covid’ strategy which saw lithium processing halt in some areas of the country, while EV manufacturers like Tesla have been forced to suspend factory production at times. Indeed, China has promised a crackdown on illegal mining which could see prices shoot up again, with analysts predicting that 10% of global production could be affected.

Finally, there are multiple ways to invest in ASX lithium stocks. It’s worth noting that lithium is mined from three types of deposits: brine, pegmatite lithium and sedimentary, with Australia accounting for most of the sedimentary lithium worldwide. Many lithium investors prefer to invest across all three types.

More widely, many investors choose to buy shares in a diversified miner like Rio Tinto to gain exposure to lithium while limiting overall risk. Of course, this cuts both ways, with diversified miners unlikely to feel the full benefit of any future price rise. And most of the stocks on this ‘top 10’ list are large-cap miners, with the potential for share price hikes in the long term with rights to exclusive projects. But small-cap lithium stocks can be more lucrative, despite carrying more risk.

And long term, pure-play ASX lithium stocks are exciting prospects for the adventurous investor.