Top 10 ASX lithium stocks to watch
A brief examination of ASX lithium stocks, their advantages and drawbacks, and a rundown of the 10 best lithium stocks to watch in Australia this year. These stocks are the largest lithium miners on the ASX.
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 (EVs).
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, the lithium price fell sharply in 2023 due to several complex factors — including Chinese overstocking and oversupplied markets.
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. Nickel batteries also 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 typically have a shorter shelf life than nickel batteries before needing replacing. And because nickel is more widely used, 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.
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. The company 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 fell sharply back in 2023 as supply caught up, Chinese demand faltered, and the world teetered on the brink of global recession.
According to The International Energy Agency (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 internal combustion engine (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.
In March 2023, ex-US President Joe Biden invoked emergency Presidential powers under the Cold War era 1950 Defense Production Act. The aim was 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 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 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, leading EV manufacturers like Tesla to be 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 the majority 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. While 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, small-cap lithium stocks can be more lucrative, despite carrying more risk.
Overall, pure-play ASX lithium stocks are exciting long-term prospects for the adventurous investor.
Best 10 ASX lithium stocks to watch
The following ten shares represent some of the largest lithium miners on the ASX. The stocks are listed by market cap, from largest to smallest. Although the final stock has a considerably lower market cap than the others, it’s worth keeping an eye on, as it has attracted significant investor interest.
Remember, past performance is not indicative of future returns.
Rio Tinto Ltd (ASX: RIO)
Rio Tinto is a leading global mining company and one of the largest listed on the Australian Securities Exchange. The company has a diverse portfolio of assets, including iron ore, aluminium, copper, diamonds, and other key minerals. Rio Tinto is particularly dominant in the iron ore sector, where it is one of the top suppliers to the global steel industry.
The company’s success can be attributed to its vast scale of operations, efficient production methods, and strategic focus on high-quality, long-life assets. Additionally, Rio Tinto invests heavily in technological innovation and sustainability, which helps it maintain competitive advantages and navigate market fluctuations effectively. By prioritising operational excellence and responsible resource management, Rio Tinto has built a strong reputation and continues to deliver solid financial performance, making it a key player in the global mining industry.
Market Capitalisation: $179.56B
Pilbara Minerals Ltd (ASX: PLS)
Pilbara Minerals is an Australian lithium producer, operating the Pilgangoora Lithium-Tantalum Project. A key player in the rapidly expanding global lithium market, the company focuses on extracting and supplying the metal for EV batteries and energy storage use.
According to the organisation, 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.’
The miner has long been seen as the trailblazer for Australia's lithium boom. And, despite the lithium price plunge, the miner remains well capitalised to continue with its expansion plans.
Market Capitalisation: $8.94B
Mineral Resources Ltd (ASX: MIN)
Mineral Resources is a diversified mining services corporation, with significant operations in iron ore, lithium, and mining services. The company is a major player in the Australian lithium sector, with interests in key projects such as the Wodgina and Mt Marion lithium mines. Additionally, the organisation provides a wide range of mining services, including crushing, processing, and infrastructure solutions, making it a crucial partner for many mining operations across Australia.
Mineral Resources boasts a strong, diversified portfolio and an ability to deliver integrated services across the mining value chain. The company’s strategic investments in lithium, alongside its established iron ore operations, position it well to capitalise on the growing demand for battery materials, particularly in the electric vehicle sector. This diversification and operational expertise underpin its resilience and growth.
Market Capitalisation: $8.82B
IGO Ltd (ASX: IGO)
IGO is an Australian mining company focused on producing battery metals, particularly lithium and nickel. The organisation is a significant player in the lithium sector through its stake in the Greenbushes Lithium Mine, one of the largest and highest-grade lithium operations globally. This arguably makes it the most lucrative domestic operator and one of the best lithium assets in the world. However, with lithium prices falling and volume orders slowing, the operator has recently chosen to reduce production at flagship Greenbushes.
On the plus side, Jarden analysts consider that the mine could remain profitable even if spodumene concentrate falls to as low as US$420 per tonne.
Market Capitalisation: $3.95B
IIuka Resources Ltd (ASX: ILU)
Iluka Resources is a leading Australian mining company primarily involved in the exploration, mining, and processing of mineral sands, including zircon, rutile, and synthetic rutile. These materials are essential for a wide range of industrial applications, such as ceramics, paints, and electronics. Iluka is also a major producer of titanium dioxide products.
In recent years, Iluka has diversified its operations by entering the rare earths market, with a focus on producing lithium and other materials used in high-tech industries, including renewable energy and electric vehicles. The company’s diversification strategy, combined with its strong operational expertise and commitment to sustainability, has contributed to its long-term success. By positioning itself as a key supplier of critical minerals, Iluka Resources continues to capitalise on the growing global demand for high-quality mineral products.
Market Capitalisation: $2.48B
Liontown Resources Ltd (ASX: LTR)
Liontown Resources is an Australian mining company focused on the exploration and development of lithium projects. The company’s flagship asset is the Kathleen Valley Lithium Project in Western Australia, one of the most advanced and high-grade lithium deposits in the country. It aims to ‘find, develop and supply battery minerals required by the rapidly growing Electric Vehicle and Energy Storage industries.’
The company controls two lithium deposits in Western Australia and is expanding its portfolio through additional exploration, partnerships, and acquisitions. The Kathleen Valley project is expected to supply 500,000 tonnes of 6% lithium oxide concentrate per year when production begins. Liontown’s Albemarle takeover was the subject of interest for much of 2023, though this was scuppered by Gina Rinehart, who has taken a sizeable position in the company.
Market Capitalisation: $1.93B
Patriot Battery Metals (ASX: PMT)
Patriot Battery Metals is a Canadian-based exploration company focused on the development of its flagship Corvette Lithium Project in Quebec, Canada. The company specialises in the exploration of battery metals, particularly lithium, the critical component in the manufacturing of EV batteries and energy storage systems. The Corvette project is one of the most promising lithium exploration projects in North America, with significant potential to supply the growing demand for battery-grade lithium.
Patriot Battery Metals’ growth is driven by its strategic focus on high-quality lithium assets in a favourable mining jurisdiction, combined with strong market fundamentals supporting the transition to renewable energy and electric vehicles. The company’s ongoing exploration and development efforts have positioned it as a key player in the global battery metals supply chain, attracting considerable investor interest.
Market Capitalisation: $726.41M
Vulcan Energy Resources Ltd (ASX: VUL)
Vulcan Energy Resources is an Australian company focused on producing lithium with a strong emphasis on sustainability. The company is developing the Zero Carbon Lithium™ project in Germany’s Upper Rhine Valley, which aims to extract lithium from geothermal brine using renewable energy, resulting in a net-zero carbon footprint. Vulcan’s innovative approach positions it as a leader in the sustainable supply of lithium for electric vehicle batteries and energy storage systems.
The organisation aims to drive a net-zero carbon future by supplying lithium chemicals and renewable energy from Europe, for Europe, through its Zero Carbon Lithium™ project. This innovative approach is unique, as it avoids using evaporation ponds and traditional mining methods.
Vulcan also plans to use geothermal energy to produce lithium with net-zero carbon emissions, and in 2022, it acquired a geothermal power plant in Germany to support this initiative.
Market Capitalisation: $707.59M
Leo Lithium Ltd (ASX: LLL)
Leo Lithium is an Australian mining company focused on the exploration and development of lithium projects, primarily through its flagship Goulamina Lithium Project in Mali, West Africa. The Goulamina Project is one of the largest high-grade lithium deposits in the world, positioning Leo Lithium as a significant future mineral supplier.
The company’s success is attributed to its strategic focus on high-quality lithium assets and its commitment to advancing the Goulamina Project through a joint venture with Ganfeng Lithium, one of the largest lithium producers globally. This partnership increases the corporation’s access to capital, technical expertise, and global markets, and positions the company to meet the growing demand for lithium driven by the global transition to clean energy.
Market Capitalisation: $605.08M
Prospect Resources Ltd (ASX: PSC)
Prospect Resources is an Australian-based mining company focused on the exploration and development of battery metals, particularly lithium. The company was originally known for its flagship asset, the Arcadia Lithium Project in Zimbabwe, which was one of the largest hard rock lithium deposits in Africa. Although Prospect Resources sold its stake in the Arcadia Project, the company continues to explore and develop other opportunities in the battery minerals sector.
Prospect Resources’ success has been driven by its ability to identify and develop high-quality lithium assets in strategic locations. The company’s strong focus on battery metals aligns with the growing global demand for green energy, positioning it as a key player in the transition.
Market Capitalisation: $59.78M
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