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Date : 08/10/2021

Why Lithium Stocks On ASX Still A Good Investment Choice?

Best Lithium Stocks Worth Looking On ASX For Your Next Investment

October is often referred to as the “crash” month. Will history repeat for the ASX 200? Well, the great crashes of 1929, 1987 and 2007 all happened in October. Already, stock markets have looked nervous the past few weeks.

The ASX 200 has sunk by 5.5% since its mid-August peak. Although, we could anticipate this correction as the market has been nervous after not seeing any pullback since the COVID-19 crash in March 2020. We think that investors should not be too worried. Hence, September broke an 11-month winning streak for the ASX 200. Therefore, a correction is a healthy thing. Thus, it can help to readjust and recalibrate asset valuations that may have become unsustainably high. For investors, corrections can provide the opportunity to take advantage of discounted stocks.

At the moment of writing, the ASX 200 continues its rebound adding 0.26% to this week returns of 1.76%.

Our List of Lithium Shares That Performed Well Last Month

The price of lithium continued to rage higher during the first quarter of FY22 sending ASX lithium shares skyward. Here are three lithium stocks you might add to your portfolio:

Orocobre Limited (ASX: ORE)

Orocobre is one interesting stock in the resource sector. It is an Australian mineral resources company based in Brisbane. ORE is a global supplier of lithium carbonate and boron. They have resources predominantly located in Argentina.

Orocobre has a solid partnership with the trading arm of Toyota. ORE has built the first commercial, brine-based lithium operation in ~20 years. The firm mainly produces and sells lithium to various industries. What we also like about this company is that it is one of the biggest and lowest-cost lithium producers in the world.

Besides, Orocobre is quite active. Hence, ORE is in the process of constructing a large-scale lithium hydroxide plant in Japan. This is the first of its kind for the country. The infrastructure will provide lithium-based products for the development of batteries.

Since the start of the year, the lithium miner’s shares have risen by an impressive 85%. ORE shares are currently valued at $8.26. It might seem overstretched given the year-to-date performance. But it is not the opinion of most of the analysts on the market. Actually, Citi has retained its buy rating and lifted its price target on ORE to $10.50 per share. In fact, based on the current share price of $8.26, this implies a potential upside of 27% over the next 12 months.

Magnis Energy Technologies (ASX: MNS)

Magnis intends to become one of the key players for the end-to-end supply chain in sourcing high-quality graphite. Graphite is a crucial ingredient for the development of batteries. As of today, Magnis has a world-class graphite deposit in Tanzania. This site has high distribution towards natural flake graphite in the Super Jumbo and Large flake categories. In fact, the world supply of such categories is very low, making Magnis’ project highly valuable.

In our opinion, Magnis could become the sixth-largest battery manufacturer in the world. The lithium-ion battery industry is a nascent industry with an addressable market of $100 billion by 2022. In a very competitive sector, Magnis has certain advantages over its peers. The company has unique intellectual properties in battery technology. They have patent protection in over thirty-five countries. Magnis is also run by a highly experienced and credible board of Directors, with Nobel Prize winner. In fact, the firm disposes of unrivalled capabilities and expertise in the lithium-ion battery, automotive innovation, and mining sectors. Moreover, Magnis is on the way to become a fully vertically integrated company. This provides the firm end to end supply chain management and control, and that is a serious edge over the competition.

Currently, at around 30.5 cents per share, Magnis could exhibit massive upside potential with the commercial production for 1HFY22.

Vulcan Energy Resources (ASX: VUL)

Another lithium play that we like is Vulcan. Today, Vulcan price action appears to be relatively stable at $11.58 per share. VUL shares are currently at a 30% discount from their recent all-time high at $16.65. This could be an opportunity to consider some Vulcan shares for your portfolio while it is still cheap.

2021 so far is an impressive bull run for Vulcan, given VUL priced at $2.73 at the beginning of the year compared to today’s double-digit share price.

Let’s look at what is been propelling the Vulcan share price higher this week.

Most recently, the lithium developer announced a five-year strategic partnership and binding lithium offtake term sheet with Renault Group. Furthermore, Vulcan shares have also come under the spotlight after the company was recently added to the ASX 300 index. Through its new listing, as a result, Vulcan share price received extra attention from index funds and fund managers.

Additionally, what could significantly move Vulcan could be the recent headlines, which is an update of its Zero Carbon Lithium Project.

Vulcan has its flagship project located in Europe, in Germany’s Upper Rhine Valley. At the current development pace, the company is set to become the first lithium producer with net-zero greenhouse emissions on the planet.

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