ASX shares that represent lithium miners and processors have done very well the last couple of years.
The element has seen skyrocketing demand triggered by the world's transition from cars that burn fossil fuels to those that run on electric power.
Electric vehicles require massive batteries, and lithium is a major ingredient for them.
"We only have to look at the recent results from South American lithium behemoth Sociedad Quimica y Minera de Chile (NYSE: SQM) to see the dramatic effect that rising prices have had on profitability," read a memo from Marcus Today.
"SQM made a big jump in 3Q earnings this year from US$1.7m in 2020 to US$106m. Revenues were up 46.1% on higher prices and more production."
We need more lithium and Australia is a major producer
The thirst for lithium will not be quenched anytime soon.
"There are 200 new battery megafactories in the pipeline by 2030 and 122 are already operational. China is pegged for 148 of them," read the Marcus Today memo.
"If all 200 were to be producing batteries at full capacity, annual demand would be 3 million tonnes. To put that in perspective, that is 37 times what was produced in 2020."
Even though the US is a leader in new technologies, and is the home of EV leader Tesla Inc (NASDAQ: TSLA), the country surprisingly doesn't produce much lithium itself.
"Australia, Chile and China now produce 88% of global lithium," stated the Marcus Today team.
"The US has only one lithium producing mine."
So this gives Australian investors a golden opportunity to cash in.
The trouble is, most ASX shares that have anything to do with lithium have already skyrocketed in price.
The Marcus Today team thus picked out 3 ASX lithium shares that haven't fully popped yet. Two are speculative buys, while one has firmer prospects.
This miner has 3 lithium projects
Piedmont Lithium Inc (ASX: PLL) shares have doubled since the start of the year, but all of that gain was realised by mid-February. Thus, the stock price has been flat for 10 months.
"This company has a North American focus in North Carolina. It has hard rock lithium in 3 locations," stated the Marcus Today team.
"It is going through… environmental hurdles. There are still plenty of boxes to be ticked."
However, the memo noted this is not a binary outcome stock, as Piedmont has other projects in progress — one in Canada and another in Ghana.
"Capex again will be relatively high at $839 million but it should pay that back in under three years," the team stated.
"Just for good measure, it is also ESG friendly."
2 other ASX shares for a lithium play
The two more speculative buys the memo mentioned are Sayona Mining Ltd (ASX: SYA) and Ioneer Ltd (ASX: INR).
Sayona co-owns a site in Quebec, Canada with Piedmont.
"Piedmont effectively owns a 39.6% economic interest in Sayona Quebec," stated Marcus Today.
"Just to give Sayona an Australian flavour, it also has projects in WA, including a gold project and graphite in the Kimberley. Sayona has a market cap around $1 billion but clearly has potential."
The Sayona share price started 2021 at 1 cent but closed on Wednesday at 13 cents.
Meanwhile, Ioneer is working on a project called Rhyolite Ridge in the inland US state of Nevada.
"US Lithium is especially attractive given the president has decreed that lithium is a strategic white powder."
The coming year could be huge for Ioneer shares, as financing should be finalised with a possible first shipment of lithium in the second half of 2022.
But the project is facing some environmental hurdles, with a plant named Tiehm's Buckwheat only growing in one place in the world.
"That's right, on the Rhyolite Ridge in Nevada," read the Marcus Today memo.
"Ioneer is not without its issues but, given the strategic nature of the project, the company will move heaven and earth (and Buckwheat) to satisfy the environmental concerns."
Ioneer shares started the year at 28 cents but were going for 78.5 cents on Wednesday afternoon.
