Investing in ASX lithium shares

Investing in ASX lithium shares

As the world turns more and more toward alternative energy sources, the investment spotlight is landing on lithium, an essential component of the batteries used to power electric vehicles.

In this article, we’ll look at how to invest in ASX lithium stocks and why they may be worth considering for your share portfolio.

A green fully charged battery symbol surrounded by green charge lights representing the surging Vulcan share price today
Image source: Getty Images

What are ASX lithium stocks? 

Lithium stocks are shares in companies involved in the exploration, mining or processing of lithium. 

Lithium is a valuable commodity with uses in everything from medications to batteries. It is a key ingredient in lithium-ion batteries, the lightweight, rechargeable batteries that power laptops, phones, electric vehicles, and other digital devices. 

The lightest known metal, lithium may become scarce as demand increases. Global demand is expected to more than double between 2025 and 2030, with supply security becoming a top priority for ASX technology companies

Australia is the world’s biggest producer and exporter of lithium. The world’s largest known deposits are located in Australia, Chile, China, and Argentina. Commercially, lithium is produced by extracting lithium salts from underground brine reservoirs or mining lithium-containing rock. Extraction requires a variety of processes and the use of speciality chemicals. 

The price of lithium carbonate more than quadrupled in 2021, thanks to heavy demand from the automotive sector. But prices can be volatile – as demand increases, new mines can open, increasing supply and putting the brakes on price increases. 

Why invest in ASX lithium stocks? 

As lithium price momentum continues, investment in ASX lithium shares has gone from strength to strength in 2022. Demand for the battery metal remains strong, driven by the shift to clean energy and electric vehicles.

ASX lithium stocks have benefitted from this continued high demand, which has provided tailwinds to share prices. 

5 top lithium share performers in FY22

(based on market capitalisation from high to low)

Company Market capitalisation Description
Rio Tinto Limited (ASX:  RIO) $40.4 billion A mining and metals company that produces lithium in the
United States and has plans for a new lithium project in Serbia
Mineral Resources Limited (ASX: MIN) $10.5 billion Owns a portfolio of mining operations across lithium and iron
ore, with two hard rock lithium mines in Western Australia
Pilbara Minerals Ltd (ASX: PLS) $7.7 billion Strategic metals producer that owns the Pilgangoora
lithium-tantalite project in the Pilbara region of Western Australia
Allkem Ltd (ASX: AKE) $7.7 billion Leading global supplier of lithium chemicals with a portfolio of
lithium operations and facilities in Argentina, Australia, and Japan
AVZ Minerals Ltd (ASX: AVZ) $3.6 billion Australian-based mineral exploration company developing the Manono
Lithium and Tin Project in the Democratic Republic of Congo

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Rio Tinto

Rio Tinto is a giant of the Australian resources sector, producing raw materials including copper, iron ore, aluminium, and industrial minerals. The company sources battery-grade lithium from mining waste rock at operations in California. A breakthrough lithium production process is used that involves separating lithium from rock that has already been mined. The California plant has an initial capacity of 5,000 tonnes per year of lithium – enough to make batteries for approximately 70,000 electric vehicles. 

In early 2022, Rio Tinto completed its acquisition of the Rincon lithium project in Argentina. Rincon is a large undeveloped lithium brine project capable of producing battery-grade lithium carbonate. CEO Jakon Stausholm said Rincon positioned Rio Tinto “to meet the double-digit growth in demand for lithium over the next decade”. 

Rio Tinto also has plans for a new project in Serbia, which would become one of the world’s largest greenfield lithium projects. The company is exploring options to secure the necessary government permits. Rio Tinto believes market fundamentals for battery-grade lithium carbonate are strong. Demand is forecast to grow 25%–35% per annum over the next decade, with a significant supply deficit expected in the second half of the decade. 

Key metrics: 

  • Market cap: $40.4 billion (as of 28 April 2022)
  • Average daily volume: 1.7 million
  • Headquarters: London, United Kingdom

Mineral Resources 

Mineral Resources has two hard rock lithium mines in Western Australia. Operations are based out of Mt Marion in the Goldfields, and Wodgina, in the Pilbara region. The Mt Marion mine was initially designed to produce 206,000 tonnes of spodumene concentrate per annum. 

Spodumene is considered the most important lithium ore mineral. An upgrade is underway to increase production at the mine to 600,000 tonnes per annum. Wodgina is one of the world’s largest hard rock lithium deposits. Mineral Resources is also upgrading operations at Wodgina to produce 750,000 tonnes of spodumene concentrate per annum. 

Mineral Resources is focused on significantly expanding its spodumene supply to capitalise on continued growth in the global electric vehicle market. 

Key metrics: 

  • Market cap: $10.5 billion (as of 28 April 2022)
  • Average daily volume: 1.7 million
  • Headquarters: Perth, Western Australia 

Pilbara Minerals

A pure-play lithium company, Pilbara Minerals owns the world’s largest independent hard rock lithium operation. The Pilgangoora Operation produces spodumene and tantalite concentrate in Western Australia’s Pilbara region. The company is pursuing a diversification strategy to become a sustainable, fully-integrated lithium producer and supplier. This will position Pilbara Minerals as a significant player in the growing lithium supply chain. 

Pilbara Minerals achieved its production guidance in the March quarter of 2022 despite disruptions related to COVID-19, as lithium prices continued to hit new highs. Another step up in prices is expected in the June quarter. In response to the surging global demand for lithium raw materials, programs are underway to increase spodumene concentrate production at Pilgangoora. 

Key metrics:

  • Market cap: $7.7 billion (as of 28 April 2022)
  • Average daily volume: 24.1 million 
  • Headquarters: Perth, Western Australia 


A specialty lithium chemicals company with a global portfolio. Operations include lithium brine and borax operations in Argentina, a hard rock lithium operation in Australia, and a lithium hydroxide conversion facility in Japan. Formed by the merger of Galaxy Resources and Orocobre in 2021, the company is dual-listed on the ASX and Toronto Stock Exchange. 

Active development in Canada and Argentina is underway to enhance the international scale and meet significant market growth driven by the global transition to a net-zero carbon future. The company plans to increase lithium production three-fold by 2026, maintaining a 10% share of the global lithium market over the next decade. 

Key metrics: 

  • Market cap: $7.65 billion (as of 28 April 2022)
  • Average daily volume: 4.1 million 
  • Headquarters: Buenos Aires, Argentina  

AVZ Minerals 

AVZ Minerals is a mineral exploration company focused on developing the Manono Lithium and Tin Project in the Democratic Republic of Congo. AVZ owns 75% of the Manono Project with rights to secure additional interests. The company is awaiting the imminent grant of a mining licence for the Manono Project.

Key metrics: 

  • Market cap: $3.56 billion (as of 28 April 2022)
  • Average daily volume: 35.4 million
  • Headquarters: Perth, Western Australia

Are ASX lithium shares right for you? 

The ASX lithium sector has benefitted from increasing global demand for the metal. But investing in lithium shares can be a wild ride. Share prices can be volatile and fluctuate wildly based on the market price of lithium. 

Soaring demand for lithium does not necessarily equate to higher prices and profits for lithium companies. If supply outpaces demand, lithium prices will fall, and getting new lithium projects up and running can be costly. Diversification is key to ameliorating these ups and downs. 

A lithium-focused exchange-traded fund (ETF) may suit investors wanting broad exposure to the sector. Investors should also ensure their portfolio is sufficiently diversified outside the lithium sector.

Last updated May 2022. Motley Fool contributor Katherine O'Brien 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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