Buy this ASX lithium share with "highly compelling" economics

Goldman Sachs thinks this lithium stock is a buy.

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It has been a really tough time for ASX lithium shares.

With the price of the battery making ingredient falling to low levels on oversupply concerns, many miners are having to take drastic action to conserve cash.

You only need to look at Sayona Mining Ltd (ASX: SYA) to see how bad it has become for some lithium miners.

Yesterday the company reported an average realised selling price of A$946 per dry metric tonne (dmt) and a unit operating cost of A$1,397 per dmt. This means it is losing A$450 every time it pulls a tonne of lithium out of the ground.

But one ASX lithium share that remains highly profitable is IGO Ltd (ASX: IGO).

And it is for this reason that Goldman Sachs has just reiterated its buy rating on the lithium miner's shares.

'Economics remain highly compelling'

According to the note, the broker has retained its buy rating on IGO's shares with a reduced price target of $8.85.

Based on the current IGO share price of $7.56, this implies potential upside of 17% for investors over the next 12 months.

The broker is positive on IGO due to its Greenbushes operation. It notes that "Greenbushes economics remain highly compelling" despite current lithium prices. It adds:

Greenbushes is the lowest cost lithium asset in our coverage; Production growth more than offsets increasing strip ratio. […] We reiterate further Greenbushes expansion remains one of the most economically compelling brownfield lithium projects with a breakeven/incentive LT spodumene price of ~US$400-500/t, where the JV also retains significant optionality around extending/converting the TRP, while the resource likely underpins even further expansion (i.e. CGP5, subject to market conditions).

All in all, Goldman appears to believe that it would be a top option for anyone looking for ASX lithium shares to buy following recent weakness.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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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