There are several ASX lithium shares that brokers like at the moment.
Lithium prices have been charging higher amid strong demand for the battery material.
And it seems demand may not slow down for a while.
Rio Tinto Limited (ASX: RIO) recently completed the acquisition of the Rincon lithium project in Argentina for $825 million. Rio Tinto said:
The market fundamentals for battery-grade lithium carbonate are strong, with lithium demand forecast to grow 25% to 35% per annum over the next decade with a significant supply-demand deficit expected from the second half of this decade.
With that backdrop in mind, which ASX lithium shares do brokers think are opportunities?
Image source: Getty Images
Pilbara Minerals Ltd (ASX: PLS)
Pilbara Minerals is rated as a buy by the broker Macquarie, with a price target of $4.30. That implies a possible upside of around 15%.
The broker thinks that continuing strength of the lithium price will help Pilbara's earnings.
The first half of FY22 already showed a significant increase in the profitability of the company, with earnings before interest, tax, depreciation and amortisation (EBITDA) lifting from $3.2 million to $151.1 million.
The above result was achieved with an average selling price of around US$1,250 per dry metric tonne. However, on 23 February 2022, the miner said that since the end of the half-year, the pricing had continued to increase. Price reporting agencies indicate spot spodumene concentrate prices were in the range of between US$3,750 per dry metric tonne to around US$4,500 per dry metric tonne.
The broker also thinks that Pilbara Minerals can benefit from more of the value-added processes for lithium, not just digging it out of the ground.
The ASX lithium share recently updated the market to say that a scoping study supports the potential for the value-added path beyond spodumene concentrate at Pilgangoora in Western Australia.
Mineral Resources Limited (ASX: MIN)
Mineral Resources is another of the lithium miners that Macquarie likes.
Macquarie rates Mineral Resources as a buy, with a price target of $77. That implies a potential upside of more than 30% for the company.
The company says that its two hard rock lithium mines in WA make it one of the world's largest owners of hard rock lithium units.
It boasts that it is rapidly growing from a junior to medium-sized commodity producer "with a vast pipeline of high-quality lithium development projects and exploration targets across Western Australia".
Lithium operations are based out of Mt Marion, located in the Goldfields, and Wodgina, in the Pilbara region.
The ASX lithium share says that the Mt Marion mine was initially designed to produce 206,000 tonnes of spodumene concentrate per annum. A current upgrade project is underway to increase production to 450,000 tonnes per annum.
Not only is the company benefiting from the high lithium prices, but the iron ore prices have been climbing in recent weeks as well. According to Commsec, the iron ore price went up another 1.3% to US$162 per tonne over the last day.
