The $6.6 billion listed investment company (LIC) Argo Investments Limited (ASX: ARG) reckons IGO Ltd (ASX: IGO) and Liontown Resources Limited (ASX: LTR) are the best picks among ASX 200 lithium shares.
At Argo's annual general meeting this week, managing director Jason Beddow said decarbonisation was an important future theme. Further, rising global electric vehicle (EV) manufacturing would drive demand.
IGO shares and Liontown shares represent Argo's biggest holdings in the ASX lithium space.
Argo's 2022 annual report reveals it opened a position in Liontown for the first time in 2022. Argo bought 7,575,758 Liontown shares. Over the year to date, the Liontown share price is up 14.3%.
IGO is currently Argo's biggest lithium holding with 3,680,970 shares. Argo increased its position in IGO by 20% in 2022, purchasing another 600,000 shares. The IGO share price is up 38% year to date.
Beddow said the price of lithium spodumene had skyrocketed over the past 12 months. That's due to demand from car manufacturers seeking long-term supply contracts.
Why Argo has invested in IGO
Beddow explains:
IGO is one of the biggest lithium producers in Australia and provides high quality exposure to the rapidly growing battery materials market, with low-cost lithium and nickel operations.
The company has exposure to the Greenbushes Lithium mine in Western Australia via a 25% ownership stake. The mine has the largest installed capacity, the highest-grade reserve, the lowest cost structure, and a mine life of over 20 years.
IGO is generating very strong cashflows from existing operations and can fund future growth opportunities.
According to reporting by the Australian Financial Review (AFR), Beddow said after the meeting that demand for lithium among car manufacturers should exceed supply for at least the next five years.
He said global automakers and battery manufacturers were urgently seeking to lock in "limited supply at almost any price".
This has pushed the price of lithium spodumene up by more than 500% in 12 months, he said.
Why Argo has invested in Lynas Rare Earths
Argo also likes Lynas Rare Earths Ltd (ASX: LYC) shares. Lynas produces the elements needed to create magnets for electric vehicles and wind turbines.
Lynas is one of the world's largest rare earths miners outside China.
In the AGM investor presentation, Beddow demonstrated that demand for the rare earths neodymium and praseodymium (NdPr) would continue on an upward trajectory through to 2030.
In terms of EVs, China is forecast to increase its EV sales the most from here to 2030, according to the Argo presentation. Europe will be the second biggest growing market over time — well ahead of the United States.
Argo holds 6,779,221 Lynas shares and did not increase its holding in 2022.
Beddow explains:
Demand for rare earths is underpinned by growth in electric vehicles, wind turbines and the development of new technologies.
Lynas owns the Mt. Weld open pit mine in Western Australia, which is one of the highest grade and largest scale deposits in the world. It is the largest producer outside of China of high-value rare earth elements, including NdPr…
Lynas has started construction of an additional cracking & leaching plant in Kalgoorlie, with completion targeted in 2023, and is also in advanced studies for the construction of a US Rare Earths facility in Texas.
Argo also owns shares in the battery materials and technology company, Novonix Ltd (ASX: NVX). It owns 13,550,000 Novonix shares, having reduced its position in 2022 from 14,240,028 shares in 2021.
