After the country became the world’s largest lithium producer in 2018, many market participants are wondering if investing in lithium in Australia is a good option
Without a doubt, the energy revolution is here to stay, with forecasts for electric vehicle (EV) sales increasing every day. As a result, demand for lithium, a key element in the lithium-ion batteries used to power electric cars, is expected to triple by 2025 — reaching about 1 million tonnes in size.
For investors interested in getting into the space, here’s a brief overview of the basic facts to know about investing in lithium in Australia, including what stocks to keep an eye on.
Investing in lithium in Australia: Market overview
Lithium is found globally in hard-rock deposits, evaporated brines and clay deposits. Australia is known for its hard-rock, pegmatite-hosted lithium resources, which are largely located in Western Australia.
Hard-rock ore containing lithium is extracted at open-pit or underground mines using conventional mining techniques. The ore is then processed and concentrated using a variety of methods prior to direct use or further processing into lithium compounds.
Australia produced 40,000 metric tons of lithium in 2020. The country hosts the Greenbushes lithium asset, which is operated by Talison Lithium, a subsidiary jointly owned by miners Tianqi Lithium (SZSE:002466) and Albemarle (NYSE:ALB). Greenbushes is the world’s largest hard-rock lithium mine.
Other operations in the country are the Mount Cattlin, Early Grey, Mount Marion and Bald Hill deposits, as well as other deposits with significant lithium resources.
In terms of reserves, Australia holds over 4.7 million metric tons of identified lithium reserves, according to the US Geological Survey, which puts it well behind Chile (9.2 million metric tons). It’s worth noting that most of the country’s lithium supply is exported to China as spodumene.
Despite a strong future outlook, 2020 was a particularly tough year for lithium producers in Australia given COVID-19 restrictions. Many other factors are impacting the sector as well, including trade tensions with China and a downward trend in prices over the past few years.
In 2020, “owing to overproduction and decreased prices, several established lithium operations postponed capacity expansion plans,” as per the US Geological Survey. “Junior mining operations in Australia and Canada ceased production altogether.”
However, lithium prices have rebounded in 2021, with investor sentiment for lithium stocks picking up as well. Many analysts and market participants agree that the long-term fundamentals for lithium remain strong, with the EV revolution leading the way.
Benchmark Mineral Intelligence forecasts that lithium demand will reach 2.2 million tonnes by 2030, driven by growing EV adoption through the next decade.
Investing in lithium in Australia: Stocks on the ASX
With the lithium forecast looking bright, investing in lithium in Australia could lead to portfolio gains.
Investors interested in lithium stocks should keep an eye on companies listed on the Australian Securities Exchange (ASX). The Sydney-based stock exchange, which has a total market capitalization of about AU$2.1 trillion, has more than 2,000 stock listings.
When looking at investing in lithium in Australia, companies listed on the ASX are a good place to start learning about players in the space. Here’s a quick look at the five top lithium stocks on the ASX by market cap. Data for this list was gathered using TradingView on June 23, 2021.
1. Mineral Resources (ASX:MIN)
Market cap: AU$9.16 billion
Mineral Resources is a leading mining services provider, with a particular focus on the iron ore and hard-rock lithium sectors in Western Australia. Its current lithium projects include Mount Marion and Wodgina.
The Mount Marion lithium project, which is located in Kalgoorlie, Western Australia, is jointly owned by mining companies Mineral Resources and top lithium producer Ganfeng Lithium (OTC Pink:GNENF,SZSE:002460). The asset was initially expected to produce 206,000 tonnes of spodumene concentrate per year, but an upgrade project completed in 2019 increased production to 450,000 tonnes of all-in 6 percent spodumene concentrate per year.
2. Pilbara Minerals (ASX:PLS)
Market cap: AU$4.48 billion
Pilbara Minerals owns 100 percent of the world-class Pilgangoora lithium-tantalum project, which the company says is one of the biggest new lithium ore (spodumene) deposits in the world, with a globally significant hard-rock spodumene resource.
The current mineral resource estimate for the asset comprises 226 million tonnes grading 1.27 percent lithium oxide (lithia), 116 parts per million tantalum pentoxide (tantalite) and 0.6 percent iron oxide, meaning there are 2.86 million tonnes of lithium oxide and 57.7 million pounds of tantalum pentoxide.
3. Orocobre (ASX:ORE)
Market cap: AU$2.05 billion
Orocobre is building a substantial Argentina-based industrial chemicals and minerals company through the construction and operation of its portfolio of lithium brine, potash and boron projects and facilities.
Orocobre, in partnership with Toyota Tsusho (TSE:8015), has built the Olaroz lithium-producing facility in Northern Argentina; it is the world’s first commercial lithium brine operation built in about 20 years. Olaroz has a measured and indicated resource of 6.4 million tonnes of lithium carbonate equivalent and is capable of sustaining current continuous production for over 40 years.
4. Galaxy Resources (ASX:GXY)
Market cap: AU$1.72 billion
Galaxy Resources owns lithium production facilities, hard-rock mines and brine assets in Australia, Canada and Argentina. The company wholly owns the Mount Cattlin mine in Ravensthorpe, Western Australia, which is currently producing spodumene and tantalum concentrate, as well as the James Bay lithium pegmatite project in Quebec, Canada.
5. Liontown Resources (ASX:LTR)
Market cap: AU$1.18 billion
Liontown Resources holds two lithium projects in Western Australia. The advanced-stage Kathleen Valley spodumene lithium project has a 2020 mineral resource estimate of 156 million tonnes grading 1.4 percent lithium oxide and 130 parts per million tantalum pentoxide, with 80 percent of the resource in the measured and indicated category. The company completed a prefeasibility study in 2020 and is now progressing a definitive feasibility study on Kathleen Valley.
Liontown’s Buldania project has a maiden indicated and inferred mineral resource estimate of 14.9 million tonnes grading 0.97 percent lithium oxide and 44 parts per million tantalum pentoxide.
This is an updated version of an article first published by the Investing News Network in 2019.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.