Lithium prices have been sinking in the past couple of years, dropping by about 80%.
Still, few really know where the price is heading.
While government and industry reports point to a bright outlook for the lithium price, things are changing fast in this market.
That's why if you're looking for exposure on the ASX to the lithium sector, doing your research will pay off.
So, which is the best ASX lithium company?
Let's look at three key ASX lithium shares below.
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Pilbara Minerals Ltd (ASX: PLS)
With a market cap currently sitting around $4.5 billion, Pilbara Minerals is a major player in the lithium space.
The company owns the world's largest independent hard-rock lithium operation, the Pilgangoora Operation in Australia and the Colina Lithium Project in Brazil.
While Pilbara Minerals increased production over the last half, the company went from posting a profit of $220 million for H1 FY24 to recording a loss of $69 million.
As a result, the company's cash balance dropped from $2.1 billion to $1.2 billion over the same period.
While those figures may raise concerns, they have also created opportunities for some.
Still, I'm not ready to buy Pilbara Minerals shares just yet.
Minerals Resources Ltd (ASX: MIN)
With a market cap of about $3 billion, Mineral Resources is another major player in the ASX lithium space.
Mineral Resources has an extensive presence across mining in Western Australia, with operations in iron ore, energy, mining services, and lithium.
But its balance sheet makes me a bit wary.
The company reported net debt of $5.08 billion for 1H FY25, up from $4.4 billion for the prior corresponding period.
And with uncertainty about the company's future amid leadership challenges and legal concerns, I'm crossing Mineral Resources off my list for now.
Liontown Resources Ltd (ASX: LTR)
Liontown Resources' market cap sits around $1.2 billion, making it the smallest lithium company by valuation on this list.
Its mining operations centre around the Kathleen Valley, about 700 kilometres north-east of Perth.
The company recently announced that production had commenced at its lithium mine, Australia's first underground lithium operation.
In its latest half-year results, the lithium miner posted a loss of $15 million.
The company ended the half with a net debt of around $651 million, up by more than $300 million from the previous half.
Still, with the Kathleen Valley operation coming online, it's too early to cross Liontown off the list.
Foolish takeaway
The ASX is one of the best markets in the world to get exposure to the lithium space.
So far, Pilbara Minerals is looking like the best option when stacked up against the other two lithium shares mentioned above.
But I still need more convincing before I would buy Pilbara Minerals shares.
