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5 Best Lithium Stocks On ASX

TABLE OF CONTENTS

5 Best Lithium Stocks On ASX

5 Best Lithium Stocks On ASX

Vantage Updated Updated Thu, November 16 06:41

When it comes to electric vehicle (EV) manufacturing, few resources are as vital as lithium. With the increasing momentum of the global shift toward a cleaner economy, the demand for lithium is expected to exceed supply through 2025, with car makers and analysts saying that more lithium is needed to produce more batteries faster [1]

Lithium growing in popularity?

Lithium can be found in many parts of the world and since 2020, Australia has been the largest producer of lithium, accounting for 49% of the entire world’s resources, whereas Chile has the world’s largest known lithium reserves at an estimated 8 million tons [2]

Even though EV sales currently make up about 2% of the U.S. auto market, that share is expected to grow to 10% by 2025, according to Morgan Stanley [3]. Moreover, recent policies from Washington such as the Inflation Reduction Act, which includes significant support for electric vehicles and battery supply chain development, could further boost demand for companies in the lithium supply chain [4].

The ASX lithium stocks could very well benefit from this continuous high demand. In addition, lithium is an essential material for portable devices like smartphones and laptops, so the demand for these products will also contribute to lithium’s continued high demand [5]. As a result, many ASX lithium stocks have seen significant price increases, providing potential opportunities for investors to trade. 

When it comes to lithium stocks on ASX, many of them are in the mining and processing sectors. So just which are the better lithium stocks of the lot?

The Best Five Lithium Stocks on ASX

Even though lithium is not traded as a commodity itself (which means you can either trade or invest in the companies in the lithium supply chain), it is important to note that companies dealing with lithium could come with a higher inherent risk due to high capital requirements and technology demands.  

As a result, in choosing the best lithium stocks, we have taken the quantitative approach and have chosen stocks that have met all of the following criteria: 

Metric 1: Outperforms the ASX200 benchmark based on the buy-and-hold strategy, computed on daily closing prices for the 12-month period ending 31 March, 2023

Metric 2: Outperforms the ASX200 benchmark based on lower volatility [6]

Metric 3: Outperforms the ASX200 benchmark based on higher Sharpe ratios [7]

Using these three metrics against ASX200 as a benchmark, we have chosen the best five ASX stocks in the lithium supply chain, and ranked them accordingly. They are shown in the table below:

Market Capitalisation (AUD)Stock Price (AUD) as of 31/03/2022Stock Price (AUD) as of 31/03/2023Price Change (%)
Mineral Resources (ASX: MIN)15.326 B52.7180.5952.89
Liontown Resources (ASX: LTR)5.661 B1.882.5837.23
Pilbara Minerals (ASX:PLS)11.3 B3.23.9423.13
Anson Resources Limited (ASX:ASN)213.3 M0.1550.1816.13
Allkem (ASX:AKE)7.41 B11.4311.883.94
Table 1: Top 5 Lithium Stocks on ASX [8,9,10,11,12]

1. Mineral Resources (ASX:MIN)

Mineral Resources is a global leader in mining services, providing solutions to some of the world’s largest mining companies. The company was founded in 1992 as a two-person crushing contractor and has since grown significantly. 

The business is focused on four key growth pillars – mining services, iron ore, lithium, and energy – with each pillar targeted for transformational growth over the next five years. Regarding the lithium market, the company has emerged as a formidable player, producing lithium spodumene and lithium hydroxide at its Mt Marion and Wodgina operations.

In the next five years, the company aims to double its lithium chemical capacity by utilising its tier 1 resources with a plan to increase production from 61 Kilo-Tonnes Per Annum (KTPA) to 120 KTPA in response to the growing demand for lithium in the market [13].

Looking at the table above, the stock price of MIN has risen an incredible 52.89% over the course of a year.

2. Liontown Resources (ASX:LTR)

Liontown Resources engages in the exploration, evaluation, and development of battery minerals required by the electric vehicle and energy storage industries in Australia. The company was incorporated in 2006 and is based in West Perth, Australia.

The company controls two major lithium deposits (Kathleen Valley and Buldania) in Western Australia and aims to expand its portfolio through exploration, partnerships, and acquisitions. The company aims to meet the growing demand for lithium, driven by the increasing popularity of electric vehicles (EVs). By 2030, EVs are expected to comprise 50% of new vehicle sales, and Liontown Resources is positioning itself to be a major supplier of the key battery mineral required for their production [14].

The Kathleen Valley project is expected to produce 500,000 tonnes of 6% lithium oxide concentrate per year when production starts in Q2 2024, with a mine life of 23 years. The Buldania project has over 15 million tonnes of 1.0% lithium oxide. By 2024, the company expects to produce over 500,000 tons of lithium per year [15].

If we observe the table above, the stock price of LTR has experienced a remarkable surge of 37.23% in just one year.

3. Pilbara Minerals (ASX:PLS)

Pilbara Minerals is one of the world’s largest, independent hard-rock lithium operations that is located in Western Australia’s resource-rich Pilbara region. The company owns the Pilgangoora Project in Western Australia, which has an estimated mine life of 26 years and a maximum production capacity of 580,000 tonnes per annum.

The company is pursuing a strategy of operating, growing and diversifying their business to become a sustainable, low-cost lithium producer and fully integrated lithium raw materials and chemicals supplier in the years to come. 

The Pilgangoora project in Western Australia’s Pilbara region can quickly boost its lithium production to meet growing market demand and provide flexible product blends tailored to customers’ needs. Efforts are underway to expand production capacity at the Pilgan Plant by 100,000 dmt per annum, increasing the project’s annual nameplate production capacity to 640,000 – 680,000 dmt of spodumene concentrate by the end of 2023 [16].

From the table above, it can be seen that the stock price of PLS has gained over 23.13% in just a year.

4. Anson Resources Limited (ASX:ASN)

Anson Resources Limited was founded in 2009 and headquartered in West Perth, Australia that engages in the acquisition, exploration, and development of mineral resources in the United States and Western Australia. The company explores lithium, bromine, iodine, and boron chemicals; and zinc, lead, silver, graphite, nickel-cobalt laterite, vanadium, and uranium deposits. 

The company’s main venture is the Paradox Project, known for its noteworthy lithium brine reserves. The company has developed an extraction method that has yielded a 91.5% extraction rate. This process involves passing the lithium through resin to capture it, which can then be separated from the resin using water and further processed into lithium carbonate [17].

Anson Resources has secured all the necessary approvals to commence a drilling program for expanding its resources in the Western Strategy at the Paradox Lithium Project in Utah. This conceptual exploration target is estimated to contain a substantial amount of brine, with an estimated range of 2.1 to 2.56 billion tonnes, and high concentrations of lithium and bromine [18].

From the data presented in the table above, it’s clear that the stock price of ASN has seen a substantial climb of 16.13% in a year.

5. Allkem (ASX:AKE)

Allkem Limited, headquartered in Brisbane, Australia, was established in 2005 and specialises in exploring, developing, and producing lithium and boron in Argentina, Australia, Canada and Japan. The company’s portfolio encompasses lithium brine operations in Argentina, a hard-rock lithium operation in Australia, and a lithium hydroxide conversion facility in Japan. The Olaroz Lithium Facility in northern Argentina’s Jujuy province is one of the company’s flagship projects and sits approximately 3,900 metres above sea level [19]

Allkem Limited has partnerships with Toyota, the Jujuy provincial government, and Prime Planet Energy & Solutions, and aims to triple its production by 2026 while maintaining 10% of global lithium production for the next decade [20]. With a robust development pipeline, the company is well-positioned to meet the demand of the expanding market as the world shifts to low-emission transportation and energy solutions.

The table above displays that the stock price of AKE has undergone a minor rise of 3.94% in a year. 

Ready to trade the top 5 Lithium stocks? Sign up for a live account with Vantage and start trading CFDs on lithium stocks today. Experience one of the best in trading technology and enjoy exceptional customer support. Trading Share CFDs allows you to speculate on the price of the shares without actually owning them.

Things to Know Before Buying Lithium Stock

In addition to considering the particular sector from the lithium supply chain you would like to invest in or trade, you need to consider  a few crucial points. Can you afford to lose the money you are willing to commit to the market? Are you an investor or trader? What is your holding horizon? What is your investing/trading style? 

It is also crucial to determine whether the current market is a bull market or bear market, which can ultimately impact your buying strategy.

Recognise that Markets are Risky 

It is paramount to know that although investing and trading can potentially be profitable, it is also risky especially with the current state of inflation and market volatility. Markets can be unpredictable and sensitive to a multitude of factors that are outside the control of the company that you invested in. You should always only invest or trade with the money that you can afford to lose. 

Investing vs Trading 

The reflection on whether you are an investor or a trader is a crucial one. Your reflection on this point will ultimately decide on the amount of time you need to devote to the market, your strategy, your holding period, as well as your risk management approach. 

An investor always takes the long view, and this more passive attitude translates into a much lower time commitment in monitoring and managing your positions. On the other hand, a trader focuses on the here and now, and has a much shorter time horizon. He or she will need to spend a consistent amount of time learning, monitoring and managing the trades in order to take advantage of both the price movements in both long and short directions. 

Therefore, an investor adopts a hold-and-hold strategy using a chart of longer timeframes (such as weekly charts), whereas a trader often enters and exits a trade using the daily charts (and often charts of much lower time frames such as 4-hour or 1-hour charts) to capitalise on the movement in stock prices. 

It is important to know that most investors and traders alike utilise both technical analyses to read the signals from the market, and many investors also incorporate fundamental analysis in analysing trends. Strategies such as trend following and support-resistance trading are often used [21]

Open and Practice in Demo Account 

Since investing or trading is risky, you should not commit your hard-earned money to live accounts right away. Open a demo account instead and practise your strategy. A demo account has an identical user interface, and this will also give you feedback on your approach to the market, and help you find your style. 

Develop Risk Management Techniques 

Regardless of whether you are an investor or a trader, you should never enter the financial markets without having a solid risk management approach. The importance of protection from a stop-loss order cannot be over-emphasized. A stop loss, once triggered, will turn into a market order. The market order will close your existing trade as soon as possible. 

A stop loss on your trade is the best insurance you can have in a certain market, even though the filled price could be different from the stop loss price. 

Conclusion 

In conclusion, investing in lithium comes with high risks, but there are macroeconomic factors for an upward price movement. If you decide to invest or trade, you can and should protect yourself from the volatility of the market by learning about the market, practising in the demo account, and having a solid risk management approach. Look for companies with good reputations and a history of success. Also, make sure to do your own research and never invest more than you’re comfortable with losing. 

Disclaimer: Vantage Global Prime Pty Ltd is authorised and regulated by the Australian Securities & Investments Commission (ASIC) AFSL no. 428901. The information is generic and does not constitute a personal recommendation or advice. Past performance is no indication of future performance and tax laws are subject to change. We do not represent that any content is accurate/current. Trading derivatives carries the risk of losing substantially more than your investment and may not be suitable for all investors. You should consider whether you’re part of our target market by reviewing our Target Market Determination (TMD). Please read our Product Disclosure Statement (PDS), Financial Services Guide (FSG) and other legal documents and seek independent advice to ensure you fully understand the risks before you make any trading decisions. This information is under the copyright to Vantage and may not be used without its prior consent.

References

  1. “The world needs 2 billion electric vehicles to get to net zero. But is there enough lithium to make all the batteries? – World Economic Forum” https://www.weforum.org/agenda/2022/07/electric-vehicles-world-enough-lithium-resources/ Accessed 22 August 2022
  2. “Lithium – U.S. Geological Survey, Mineral Commodity Summaries, January 2022” https://pubs.usgs.gov/periodicals/mcs2022/mcs2022-lithium.pdf Accessed 22 August 2022
  3. “The Australian lithium industry and the global battery supply chain – Innovation News Network”. https://www.innovationnewsnetwork.com/australian-lithium-industry-global-battery-supply-chain/24081/. Accessed 22 August 2022
  4. “Legacy Automakers Gears Up to Go Electric – Morgan Stanley” https://www.morganstanley.com/ideas/legacy-automakers-electric-vehicles Accessed 22 August 2022
  5. “Investing in ASX lithium share- The Motley Fool” https://www.fool.com.au/investing-education/lithium-shares/ Accessed 3 April 0223
  6. “Volatility: Meaning In Finance and How it Works with Stocks – Investopedia” https://www.investopedia.com/terms/v/volatility.asp Accessed 22 August 2022
  7. “Sharpe Ratio Formula and Definition With Examples – Investopedia” https://www.investopedia.com/terms/s/sharperatio.asp Accessed 22 August 2022
  8. “Mineral Resources Limited (MIN.AX) – Yahoo! Finance” https://finance.yahoo.com/quote/min.ax/ Accessed 3 April 2023
  9. “Liontown Resources Limited (LTR.AX) – Yahoo! Finance” https://finance.yahoo.com/quote/LTR.AX Accessed 3 April 2023
  10. “Pilbara Minerals Limited (PLS.AX) – Yahoo! Finance” https://finance.yahoo.com/quote/PLS.AX/ Accessed 3 April 2023
  11. “Anson Resources Limited (ASN.AX) – Yahoo! Finance” https://finance.yahoo.com/quote/ASN.AX/ Accessed 3 April 2023
  12. “Allkem Limited (AKE.AX) – Yahoo! Finance” https://finance.yahoo.com/quote/AKE.AX Accessed 3 April 2023
  13. “FY23 Half Year Results – Mineral Resources” https://clients3.weblink.com.au/pdf/MIN/02635650.pdf Accessed 3 April 2023
  14. “Strategy – Liontown” https://www.ltresources.com.au/about/strategy Accessed 3 April 2023
  15. “Overview – Liontown” https://www.ltresources.com.au/about/overview Accessed 3 April 2023
  16. “Pilgangoora Project – Pilbara Minerals” https://www.pilbaraminerals.com.au/our-company/our-projects/pilgangoora-operation/ Accessed 4 April 2023
  17. “Anson Resources – Investing News Network Australia” https://investingnews.com.au/anson-resources-asx-asn Accessed 4 April 2023
  18. “Anson Resources lands key approval for Paradox lithium resource expansion program – Proactive” https://www.proactiveinvestors.com.au/companies/news/1004246/anson-resources-lands-key-approval-for-paradox-lithium-resource-expansion-program-1004246.html Accessed 4 April 2023
  19. “Allkem Limited (AKE.AX) – Yahoo! Finance” https://finance.yahoo.com/quote/AKE.AX/profile Accessed 4 April 2023
  20. “About – Allkem” https://www.allkem.co/about/our-company Accessed 4 April 2023
  21. “Technical Analysis – CFA Institute” https://www.cfainstitute.org/en/membership/professional-development/refresher-readings/technical-analysis Accessed 4 April 2023

Disclaimer: The material provided here 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. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our client. No representation or warranty is given as to the accuracy or completeness of this information and therefore it shouldn’t be relied upon as such. Any research provided does not have regard to specific financial situations, needs or investment objectives. Vantage accepts no responsibility for any use that may be made of these comments and for any consequences that result. Consequently, any person acting on it does so entirely at their own risk. We advise any readers of this material to seek professional advice where necessary. Without the approval of Vantage, reproduction or redistribution of this information isn’t permitted.

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