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Top ASX Lithium Stocks to Watch in 2021

We examine five ASX-listed companies with exposure to lithium assets.

Investing in lithium in Australia: what you need to know

The 2018 battery boom coincided with the stratospheric run up in the share prices of a number of ASX-listed lithium stocks.

That boom – as with many others in the history of financial markets, was met with a bust in 2019 – as oversupply issues saw lithium prices collapse, instilling doubts in a market that rested its hopes on an electric vehicle revolution that has yet to truly arrive.

To further demonstrate the impact of those price falls, as reported by Bloomberg:

‘Lithium-ion battery pack prices, which were above $1,100 per kilowatt-hour in 2010, have fallen 89% in real terms to $137/kWh in 2020.’

Things aren’t expected to improve any time soon either, with forecasts from BloombergNEF suggesting that prices will fall to an average of $100/kWh by 2023.

Despite that, investors have turned bullish on many ASX-listed lithium stocks in the last six months, with the likes of Pilbara Minerals gaining over 250%, Galaxy Resources has surged 191%, and Mineral Resources has added some 55%.

Looking further into the fundamentals of this market, recent research from BloombergNEF forecast that electric vehicle (EV) sales are set to hit to 8.5 million by 2025, while EV sales, represented as a percentage of all new car sales, is set to hit 10% by 2025.

Importantly, although lithium-ion has many uses outside the production of EVs – including the production of batteries for smartphones, laptops and other digital devices, armour plating and glasses as well as certain pharmaceuticals – the consensus is that its long-term viability will be ‘directionally proportional’ to the adoption of electric vehicles, according to S&P Global Platts.

Other things to consider

Lithium is mined from three types of deposits: brine deposits and Pegmatite lithium and sedimentary (hard rock) deposits, with Australia accounting for the majority of lithium hard rock mines on a global scale.

This, according to S&P Global Platts, puts Australian lithium miners and producers in an interesting position, with it being noted that ‘This has seen wider argument that Australian hard rock mining could find itself in the role of swing production, with projects coming on and offline as the price dictates.’

Top 5 lithium stocks on the ASX

Having examined some of the key issues surrounding the lithium market, below we look at five high profile lithium stocks – or companies with material exposure to lithium assets – listed on the Australian Stock Exchange.

  1. Galaxy Resources (GXY)
  2. Mineral Resources (MIN)
  3. Pilbara Minerals (PLS)
  4. Orocobre (ORE)
  5. Wesfarmers (WES)

Company

Ticker

Share price*

6-month Performance

Galaxy Resources

GXY

$3.00

191%

Mineral Resources

MIN

$38.26

55%

Pilbara Minerals

PLS

$1.25

267%

Orocobre

ORE

$5.70

82%

Wesfarmers

WES

$51.45

9.7%

*Share price data correct as of January 20, 2021.

Galaxy Resources (GXY)

Galaxy Resources' lithium assets include hard rock mines and brine deposits across Australia, Canada and Argentina. In response to the coronavirus pandemic, the company said it has 'adapted to soft conditions in the lithium market by lowering plans for 2020, prioritising the processing of stockpiled ore and reducing final product inventory levels.'
In 2020 the company went on to say that it 'remains on track to meet key operating targets in mine and processing plan for 2020.'

The company eventually announced it had met those key operational metrics in January 2021, noting that it had shipped 75,336 dry metric tonnes of lithium product during Q4 of FY2020.

Overall, FY2020 production came in at 108,658 dry metric tonnes against total sales volume of 150,630 dry metric tonnes.

Mineral Resources (MIN)

Mineral Resources is a leading Perth-based mining services provider, with assets focussed between iron ore and lithium. Mining activity was strong at the company’s key lithium Mt Marion Lithium Project during the first quarter of 2021 – with the miner reporting record production of 133,000 dry metric tonnes and record shipments of 118,000 dry metric tonnes of spodumene concentrate.

'The proportion of high-grade spodumene concentrate produced during the quarter was 73%, compared to 74% in the previous quarter. Shipped tonnes increased to 118,000 dmt in the quarter as a result of the increase in produced tonnes,’ the company elaborated.

By comparison, MIN’s iron ore operations continued to see strong production gains, with total iron ore production during the quarter coming in at 4.2 million wet metric tonnes.

Pilbara Minerals (PLS)

Pilbara Minerals is a lithium-tantalum producer, with the ambitious aim of becoming 'one of the biggest and lower cost lithium producers' in the world.

Like Galaxy, Pilbara Minerals reported that it shipped 70,609 dry metric tonnes of spodumene concentrate in the December quarter -- a record for the company. This came in well-ahead of the company’s own sales guidance – which was previously ear-marked to come in at between 55,000 to 70,000 dry metric tonnes.

Giving investor some idea to the changing dynamics of the lithium market, Pilbara in January 2021 reported two key pieces of information, including noting:

'There has been a 'Material uplift in lithium chemicals pricing within China, with Platts Battery Grade lithium carbonate pricing up 35% to dare from its lows in August 2020.'

And, that the 'Improving spodumene concentrate demand conditions are evident from both within Pilbara Minerals' existing offtake customer group and other enquiries'

Orocobre (ORE)

An industrial chemicals and minerals company, Orocobre holds a diversified portfolio of lithium, potash and boron assets across northern Argentina.

During its most recent quarter, the miner reported lower production of 2,352 tonnes (-6% QoQ), a result that the company said was driven by a three-week shutdown.

Despite lower production figures, on the top-line, Orocobre reported a 112% surge in sales volume, at 3,393 tonnes and a 68% uptick in sales revenue, at US$10.5 million. The company attributed this revenue bump to the ‘sale of excess inventory’.

Looking at the changing market dynamics, it was noted that:

'Market conditions and product pricing continued to be challenging with significantly higher sales volume of 3,393 tonnes at a price of US$3,102/tonne following the discounting of excess inventory in July.'

Wesfarmers (WES)

Iconic Australian conglomerate Wesfarmers – through its $776 million, 2019 acquisition of Kidman Resources – has significant exposure to lithium assets, primarily through Kidman's 50% stake in the Mt Holland lithium project.

The Mt Holland project – comprised of an open pit lithium mine and processing plant – in late 2018 was estimated to have a projected annual average production of 45,254 tonnes of LiOH. The Earl Grey deposit at the Holland site was estimated to have a maiden ore reserve of 94.2 million tonnes.

At the time the acquisition, Wesfarmers’ Chief Executive Officer, Rob Scott, said:

'The acquisition and our planned future investment is an attractive opportunity to participate in the development of a large-scale, long-life and high grade lithium hydroxide project in Western Australia in partnership with a global leader in the lithium industry.'

How to buy or invest in lithium stocks on the ASX

You can gain exposure to ASX-listed lithium stocks or companies with exposure to lithium-ion in two ways: either through share trading or derivatives trading. Share trading means that you take direct ownership of the stock, meaning you could potentially profit if the share price increases in value or if the company decides to pay a dividend.

By comparison to owning shares outright, derivatives trading – such as CFD trading – allows you to speculate on the price movement of a company’s shares without actually taking ownership of them. CFD trading may prove attractive to some investors for a number of reasons, including the flexibility to trade stocks long and short, the ease of which it allows to hedge, as well as the ability to gain larger exposure to an asset through leverage.

Follow the simple steps below to start investing or trading lithium stocks:

Investing in lithium stocks

  1. Create or log in to your share trading account and go to our trading platform
  2. Search for the company you wish to invest in
  3. Select ‘buy’ in the deal ticket to open your investment position
  4. Choose the number of shares you want to buy
  5. Confirm your purchase and monitor your investment

Trading lithium shares

  1. Create or log in to your trading account and go to our trading platform
  2. Decide whether CFD trading is right for you
  3. Search for the company you wish to trade
  4. Choose your position size and select ‘buy’
  5. Confirm your trade and monitor your position

Best ASX lithium stocks summed up

Traders and investors looking to gain exposure to this unique market should keep in mind that:

  • Australia accounts for the majority of hard rock lithium deposits in the world
  • Electric vehicle sales are forecast to hit 8.5 million by 2025, and make up 10% of all new car sales
  • The consensus is that the long-term viability of will be influenced by the adoption of electric vehicles
  • ASX-listed lithium stocks, though trading off the highs recorded in 2018, have traded bullishly over the last six months.

Last updated : 2021-01-20T07:22:44+0000


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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