What you need to know about ASX Lithium Stocks
Driven by demand from electric vehicle and battery power, lithium is now one of the world's most valued and prized mineral commodities. But with confusing terms like Spodumene concentrate, lithium ion batteries, to Lithium Hydroxide and a complex mining process, it is not easy to understand. We give you the basics and then 3 ASX lithium stocks.
What is it?
Lithium is a chemical element with the symbol Li and atomic number 3. It is a soft, silvery-white alkali metal that can store a lot of electricity.
Lithium has the highest charge to weight ratio, allowing the world to carry phones with a light lithium ion battery, instead of heavy lead batteries.
Battery Grade deposit
Although Lithium is relatively common, it is rare to find a concentrated lithium deposit. Its even rarer to find a battery grade lithium deposit. As such, a new lithium project, is a source of excitement for ASX Lithium Investors.
Cars need an effective power source for their weight, which is why, with lithium’s weight to charge ratio, the Lithium ion battery has become the industry standard for electric vehicles.
How to supply demand?
Lithium production is complex. New demand needs to be filled by new lithium projects, new methods of extraction and conversion, or both.
European Union's Carbon Tax
It aims to reduce emissions by pricing carbon, and forcing companies that produce that carbon to pay for it. Producing Battery grade lithium is an emission intensive process and it is something producers need to watch.
What are the Top 3 ASX Lithium stocks to Buy?
3 Quality lithium stocks with a big future
Stock market confidence in the demand outlook for battery grade lithium carbonate has increased. Our analysts agree investor demand for lithium exposure will continue rising.
These 3 lithium stocks are all in production and have growth potential.
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Share price: $0.21
Market cap: $389.7m
Dividend yield: 0%
Net cash: $26.4m
There is no doubt Panoramic is a Small Cap, but it's also the second-biggest Australian nickel sulphide producer behind BHP Billiton.
Its Savannah and Lanfranchi Projects are both located in Western Australia. PAN also holds development projects focusing on gold and PGMs.
This company has the vision to broaden the exploration and production base to become a major diversified mining house in the ASX 100. It is a long way from doing this, but in the meantime, nickel is a relatively good place to be.
Share price: $2.14
Market cap: $3867.4m
Dividend yield: 0%
Net cash: $63.9m
Pilbara Minerals is a premium Australian based lithium-tantalum producer. It owns 100% of the Pilgangoora hard rock lithium-tantalum project, located 120km south of Port Hedland, Western Australia.
The company is also aiming to build a presence in the downstream value-added lithium through the development of chemical conversion plants in South Korea and China.
Share price: $9.56
Market cap: $3212.9m
Dividend yield: 0%
Net cash: $314m
Quite recently Orocobre Has taken over Galaxy Resources, in a bid to centralise WA Lithium production reducing overhead costs in lithium processing.
Orocobre does trade on the ASX and is exceptionally well placed as an existing producer with a significant planned and funded expansion. There is still a surplus in lithium but it could be in deficit within two years.
Delays to competing projects due to COVID-19 may lead to a particularly tight economic environment. The outlook is for the lithium market to experience a 3 fold increase in lithium demand in the next 5 years.
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54% of the world's lithium deposits are in the lithium triangle, a portion of the Andean mountains between Chile, Argentina and Bolivia.
But Australia is the world’s LARGEST PRODUCER of lithium. The majority of lithium resources are located in Western Australia.
Our latest Lithium Reports
We regularly update our subscribers on the lithium market and lithium ASX Stocks that we like now. Read our latest comments below.
Should ASX Investors Buy Lithium?
Lithium ion battery has become the industry standard for electric vehicles. Companies with existing producing lithium operations will be well placed to benefit.
EVs are unstoppable
We are talking about a 20 year transformation. The move to EVs is unstoppable with all the major car manufacturers factoring EVs into their forward schedules. BMW, for example is expect to have completely exited production of internal combustion vehicles by 2050.
Legislated advantages for lithium
The introduction of government requirements for zero emissions applying to all new vehicles has been mandated by certain countries, mainly in Europe, as early as 2030.
2025 Forecast Supply deficit
With demand estimates showing potential exponential growth to 2025 and beyond, a structural deficit and higher prices could loom by 2025 at the latest. This does not provide much time for new projects.
When you’re hot, you’re hot! Global weighted prices for lithium carbonate are increasing and the trend is upward. Lithium hydroxide prices maintain a premium over lithium carbonate prices.
Battery cathode producers are flagging tight availability of lithium hydroxide, because of supply constraints of Australian spodumene.
Sustainable production key
Investors will be increasingly cautious of a lithium company which is itself a heavy carbon emitter. These issues will influence the decisions of investors such as pension funds, financiers such as banks as well as customers. As an investor a company's carbon emission reduction strategies, or environmental and sustainability initiatives are a key consideration.
Gigafactory capacity increased
In response to the rising EV sales momentum, planned global battery Gigafactory capacity is increasing with a big rise in lithium chemical and conversion capacities in China. This underpins further demand. Battery inputs such as spodumene (lithium concentrate) are converted into lithium hydroxide or lithium oxide.
Demand for lithium is based on the number of EVs required and the lithium required per battery. By 2040, battery use will account for almost 90% of global lithium demand.
Over the next 10 to 20 years we will see monster cumulative demand growth as global EV penetration takes hold.
No alternative to lithium batteries
All significant proposals for EVs involve lithium batteries. Lithium is now well entrenched with massive sunk capital in battery and vehicle design and the manufacturing plants to build them. It seems highly unlikely that any significant commercial substitute for lithium batteries will emerge.
The electric vehicle conundrum
EVs have negligible greenhouse emissions when being used, contrasted with the high emissions from petrol cars and trucks whose mode of power is the internal combustion engine. But manufacture of an EV requires a great deal of energy and produces more emissions than producing a petrol vehicle. Lithium-ion battery manufacturing is energy intensive due to the cost of lithium extraction and its processing into battery grade.
Maximising the life-cycle benefits.
The CBAM and similar schemes around the world create an imperative for miners and others in the supply chain to reduce emissions.
Exporters to the EU pay a levy based on the amount of carbon used in making and shipping products.
It requires information on the carbon footprint of every component from the mine gate to final product supply chain, as part of an “electronic product passport”.
For example, the battery alone could represent in the region of 30% of carbon emissions in an EV's lifecycle.
EU Life Cycle Assessment
Despite being emission intensive, EVs have much lower life-cycle greenhouse gas emissions than petrol vehicles. Government's now want to maximise the life-cycle benefits of EVs.
In order for EVs to make a meaningful contribution in improving the environment over their entire life, there needs to be minimal emissions i.e. in both their production and consumption.
On this front, “Life-Cycle Assessment” is used by the EU and others to monitor and reduce emissions.
How do lithium producers reduce carbon emissions?
Emission reducing strategies are being adopted for lithium mines and production facilities. These include solar power generation, the electrification of vehicle fleets, the use of green hydrogen power and downstream processing to reduce transport related emissions.
Other initiatives that help the environment and reduce costs include water usage and water table considerations.