Mineral Monday: What you need to know about lithium and which ASX shares are cashing in on it

The Australian government has listed lithium as a critical mineral for its importance in EV and grid storage batteries.

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Key points

  • Lithium is listed as a critical mineral by the Australian government
  • Lithium is a core element in EV and home storage batteries
  • Only three ASX shares are currently in the production stage

There are several dozen ASX shares that are on the hunt for lithium. A handful of others are in the pre-production stages.

But only three ASX shares are currently actually producing the metal.

We take a look at those below.

But first…

What is lithium?

Lithium is a lightweight, malleable alkali metal, silvery in colour.

Historically it’s been used to increase the heat resistance of glass and ceramics. Lithium salts are also used as antidepressants.

But it’s lithium’s high level of heat and electricity conductivity that has seen demand boom alongside the fast-growing lithium-ion battery market. Batteries that power most every electric vehicle (EV) on the road.

Lithium’s crucial role in the transition to renewables has seen the Australian government list the metal as a critical mineral.

The metal is primarily mined from ore and brines, with Australia, Chile, China and Argentina holding the largest deposits.

The government reports that Australia has high geological potential for lithium, with a 2020 Economic Demonstrated Resource of 6.17 million tonnes. In 2020, Australia produced 40,000 tonnes of lithium out of total global production of 82,000 tonnes.

So, which three ASX shares are producing lithium?

Three ASX shares cashing in on lithium

Taking them in alphabetical order, we start with Allkem Ltd (ASX: AKE), former known as Orocobre.

Allkem has a market cap of just under $6.6 billion. Based in Brisbane, its projects are primarily located in Argentina. The company supplies lithium carbonate to a variety of industrial and technical sectors, supplying roughly 10% of the global lithium market.

Allkem claims to be among the lowest-cost lithium producers in the world. The company intends to ramp up production by three times its current levels by 2026.

The Allkem share price is up 72% over the past 12 months.

The second ASX share already producing lithium is Mineral Resources Limited (ASX: MIN), with a market cap of $10.1 billion.

Though you may think of Mineral Resources as a mining services company, which it is, the company also has a large footprint in the lithium space. Its operations in Western Australia are Mt Marion, located in the Goldfields; and Wodgina, in the Pilbara region.

The company mines and produces both direct shipping ore lithium and spodumene concentrate.

The Mineral Resources share price is up 8% since this time last year.

Moving on to our third ASX share in the production stage for lithium, we have Pilbara Minerals Ltd (ASX: PLS), which has a market cap of $6.3 billion.

Pilbara’s flagship Pilgangoora Lithium-Tantalum Project is also located in the Pilbara region of WA.

Pilgangoora project counts amongst the largest hard-rock lithium-tantalum deposits in the world. Pilbara Minerals has big expansion plans for the project. It forecasts spodumene concentrate capacity at Pilgangoora to increase to 560,000 to 580,000 dry metric tonnes (dmt) this year.

The Pilbara share price is up 57% over the past 12 months.

You can find also find out which ASX shares are cashing in on cobalt and vanadium in more of our ‘Mineral Monday’ series.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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