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Best ASX Lithium Stocks & ETFs in Australia (Risks & Gains)

By Will Ellis
Last Updated on March 23, 2024
ASX Lithium Stocks

Lithium has long been a critical component to batteries. This includes everything from huge car batteries, AA batteries for children’s toys, and even the tiny batteries that go into watches. 

But in recent years, lithium has seen another use: Use in the power sources of electric cars. They were used in car batteries before, but nothing like the amounts seen in electric car batteries.

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As electric cars become the consumer’s preference, as well as the industry’s, it has things looking good for lithium.

Table of Contents:

What are Lithium Stocks? 🤔️

Lithium stocks are shares of the companies that deal in lithium and lithium products, rather than being the trade of the lithium itself. This is because when it comes to the acquisition of lithium, basically every company that deals in lithium is going to either mine it themselves or buy from a reliable source.

Lithium Stocks vs. Lithium Commodities

For that reason, it is better to view lithium stocks as representing the value of the lithium industry, rather than lithium as a commodity. 

The main companies that trade in lithium can be broken down into two categories: The first is the companies that mine and refine lithium to be usable in batteries. And the second is the companies that use that lithium in the creation of their products. 

Each is reliant on the other. With no one to mine lithium, the companies who make lithium products would have to invest more of their capital into acquisition of lithium. And with no one making lithium products, the companies who mine and refine lithium would have no one to sell their products to.

Best Lithium Companies in 2024 ➡️

Australia is one of the world’s biggest suppliers of lithium, meaning that our mining and refining operations are second to none.

Mineral Resources Ltd.

One of Australia’s largest companies, Mineral Resources Limited is an extraction company. Their primary ores are gold, iron, and lithium, though they are not known for simply taking minerals from the ground.

Mineral Resources Limited also has an expansive infrastructure arm. This allows them to not only save money on the transportation of their goods, but also make money by facilitating the transportation of other companies’ goods as well. This makes them a highly reliable extraction business.

Their business has seen a massive uptick in the last two years. 

They rarely traded shares at over 20 AUD before 2020. Now, they regularly stay above 40 AUD, even with fluctuations in their prices.

Pilbara Minerals Ltd.

Pilbara Minerals has an odd history, originally starting as a sports bookmaker, taking bets on games of football and cricket. They eventually broke off into goldmining. This resulted in them expanding into other lucrative forms of mining until they were no longer taking bets on sports games anymore.

It was not until 2020 that they got into lithium mining, and their share price has soared as a result of this venture. They are not nearly as bustling with business as Mineral Resources, with their share price going from around 1.5 AUD before 2020 and between 3.5 and 4 AUD ever since 2020.

In short, Pilbara Minerals might not be the juggernaut that Mineral Resources is, but they are something of a rising star in the industry for how much value they have been able to generate after shifting gears.

Orocobre (and Galaxy Resources)

In August of 2021, Australia-based lithium mining company Galaxy Resources merged with fellow lithium producer Orocobre (also based in Australia). The result is a company with a huge share of the lithium production pipeline. Owning several mountains and refinement facilities, these two companies combined their operations to make a far more cost-efficient lithium mining and refining business.

The financial results are easy to see. Both of their shares were 5 AUD before the merge, with Orocobre growing in excess of 10 AUD afterwards. That is about as much as you would expect, though some analysts point out that a merger should produce a multiplicative effect rather than an additive one.

Still, Orocobre has seen no issue in expanding its operations since the merger. They are noteworthy for their extensive work in social responsibility initiatives among mining companies. 

The Risks in Investing in Lithium ⛔️

Investing risk

Buying into the lithium industry can be as simple as buying shares of a particular lithium company. But that is not always the optimal path to take.

Anyone looking at the share prices of these companies will note that while they might be reliable as businesses, they do not have trustworthy share prices.

In every case, each lithium business has a low and mostly stable share price until 2020. After that, the demand for electric vehicle batteries causes most of their share prices to double, sometimes tripling. 

Market Volatility

The big issue there is that if a company has a sudden increase in value, then it is inevitable that their value dips shortly after. 

You can see this most clearly expressed in the value of Mineral Resources’ stock prices. It jumped up to 60 AUD per share and has bounced between that and 40 AUD for at least a year.

The Lithium Bubble

That tendency has all the warning signs of a bubble. Everyone who is heavily invested in Mineral Resources is holding their breath whenever it starts to come down from a 60 AUD peak. They are worrying that this might finally be when the stock price crashes back down to less than 20 AUD.

Why Would This Bubble Pop?

The reason that this bubble is anxiously anticipated to “pop” is quite simple. 

In the stock market, whether you are on Wall Street or the Australian Securities Exchange, there is a rule that has always held true: What goes up must come down. If a share price increases, it will decrease eventually.

Reality proves this to be the case time and again. It is built into the nature of the stock market. When Mineral Resources shares get down to 40 AUD, people buy them. When they get above 60 AUD, people sell them. But lacking the years of growth to prove that Mineral Resources can sustain this turbulence, it is uncertain if and when investors will stop investing in Mineral Resources.

Who Controls Lithium? 🔎️

A huge part of the uncertainty around the lithium industry is not that it is unstable by itself. Like we said earlier, it was stable until 2020. The issue is that the value injected into it is completely dependent on one other company: Tesla. 2020 was a big year for lithium due to their new electric car initiatives.

That means that while a great many companies work in the lithium business, they do not have total control over themselves. 

They all end up working for the same clients, and the biggest of those clients by far is Tesla. All it takes for the bubble to pop is for Tesla to develop a battery that doesn’t use lithium.

This would not be such a scary thought were it not for the fact that we know that Tesla is currently experimenting with new batteries. They are using lithium for now. But will they use lithium for long enough that an industry outside of Tesla can rise to support the lithium companies?

The Risks and Gains of Lithium ETFs

No company is perfect, but in this highly volatile and dependent environment you can be assured that no single lithium company is even close to perfect. After all, it only takes one offensive tweet by a CEO or bad PR incident at a mine for Tesla to decide not to do business with a single company.

But at the same time that the lithium bubble risks popping, it is still clearly in the process of booming. It behooves a stock trader to see both at once in equal measure. Given that, how can one capitalize best on the lithium boom that is ongoing while still mitigating the ever-present risk of a bust?

What is Less Risky Than a Stock?

The answer is in a trading tool scarcely used by anyone outside of certain mineral investment companies and mutual funds: ETFs. 

ETF is an acronym for “exchange traded fund”. It is a security that can be bought from brokers and gets its value from an index of a certain commodity or industry.

In this case, the commodity and industry are one in the same: Lithium. By investing in lithium ETFs rather than individual companies, you can profit from the growth of the lithium industry as a whole. 

What it Means for an ETF to Track and Index 📊️

The speed bump that many people fall over when learning about ETFs is their definition. What does it mean to “track an index”? If you do not know what an index is, then you will immediately be confused.

To begin with, an index is a database. Like all databases, an index holds information and uses the information to make calculations. In this case, the information in the database is the transactions going on between all of the lithium companies and the clients they serve, as well as the prices of their shares.

That means that saying an ETF “gets its value from an index” means that it gets its value from calculating the total worth of all the investments going on in a certain industry and/or with a certain commodity.

Because the value of an ETF is determined by the whole industry or a real commodity, rather than being tied to any particular business within that industry, it is a good measure of how well the industry is doing. Inversely, it is also means that it is a good security to trade if you know the industry is doing well.

What is Inside an ETF?


Knowing that an ETF is an index means that you know how it gets its value. But that does not mean you know what gives the ETF its value.

This distinction is meaningful, as an ETF is not a stock in any particular company. It is more like a bundle of stocks from lots of different companies, all influencing each other.

When you purchase an ETF from a broker, you are actually purchasing a portion of many different shares in many different companies simultaneously.

This surprises many people, as it means that their portfolio usually gets several times more diverse with their first purchase of an ETF.

What Does a Diverse Portfolio Mean?

This means that you can execute some creative investment strategies with ETFs. These include buying the ETF for the stocks that constitute them, and then selling a “fractional share” of the ETF. When selling a fractional share of an ETF, you are selling only specific stocks that make it up.

This has its own risks and rewards, of course. You better have a clear idea of which stocks in the ETF are going to grow and which are going to shrink in order to profit off of this method. 

Why Sell a Fractional ETF?

Doing this also has a pretty clear drawback: The reason why these stocks were bundled together in the first place is because they are generally expected to follow similar trends in the market. Why sell a fraction of them and keep the others if they are expected to all go the same direction?

The simple answer to that question is that you suspect that the index of the ETF is not going to be as uniform as the bundle implies. 

Profiting off of Fractional Selling 💰️

Consider the lithium industry. As discussed before, it is an industry that has exploded in the last couple of years with no real promise of long-term growth. Even worse, it is highly dependent on one trillion-dollar corporation to keep it booming. Any company that gets on that corporation’s bad side will suffer.

When you buy an ETF in lithium you are getting stocks of all the companies involved in the industry. Mineral Resources, Pilbara, Ocobocre, etc. With this one purchase, you now have the ability to respond to any shift in the entire lithium industry. If Company A makes an amazing deal or advances lithium refinement practices, you have stock of theirs with which to profit from this advancement.

Alternatively, if Company B begins to make mistakes or discovers their mine has run dry, you can respond by selling before their share price begins to drop. 

You can even trade shares from Company B for portions of Company A’s shares, which will usually be far more cost-effective than trying to sell Company B’s shares right before their personal bubble bursts.

How to Buy and Sell ETFs 🛒️

Now that you know the diversity of things you can do with ETFs, it is time to learn how the actual trading of ETFs works. As stated before, they are bought from a broker, but they can also be bought yourself from an online trading platform, so long as you have your own brokerage account to buy them with.

Finding an Investing Platform

You cannot invest in ETFs if you are on a platform that does not support them, so the obvious first step is getting on one such platform. Surprisingly, many of the more popular platforms do not support ETF trading. You will want to go with TD Ameritrade or Charles Schwab to trade ETFs.

There are plenty of platforms that support this kind of trading, but eToro, Robin Hood, and many other popular platforms do not. The reason is that those platforms do not do much index trading in general.

Research Your Industry

Because ETFs are securities that bundle together shares and bonds from whole industries, it is important to scrutinize your options heavily before investing into one industry. The reason why lithium is such a good industry for ETFs is because it is relatively small as far as mineral extraction and refinement go.

It is not gold, iron, or copper, where there are dozens of companies all over the world mining it, transporting it, refining it, and (most importantly) using it. Lithium is mainly extracted and refined in Australia. While it is used all over the world, easily the biggest buyer is just one company: Tesla.

The risks and rewards of this ecosystem are easy to understand. Contrast this to the other minerals we mentioned: Iron is used in cars, computers, military technology, farming tools, and much more. Researching that industry could consume your entire life.

Look for Straight Lines

It is much better to stick to a small industry, or at least one made up of “straight lines”. By straight lines, we mean an industry where the money involved in it moves very transparently. Time and again we have brought up Tesla being the principal buyer of lithium. That is because it makes lithium easy to track.

What you want is an industry where the lines of supply and demand are clear. Company A makes a product, that product requires a commodity or service, and Company B provides that commodity or service. In this case, Tesla makes electric cars, electric cars require lithium, Material Resources provides.

Things get confusing when “Company A’s” needs reflect problems with multiple solutions. 

Consider Whether Your Investments are Growth or Income Investments

This is a good thing to practice no matter what, but it is especially important when you are investing in ETFs. The reason being that the diversity of stocks included in any given ETF can reflect equally diverse trading potential. That means the ETFs are tools that are not particularly given to one single use.

Deciding between growth or income investments determines two things. The first is the industry you are investing in. There is no industry that can be treated as both a growth industry and an income industry.

What is a Growth Industry?

A growth industry is one where you can expect to see even increases in value over the next ten years. Metals are growth industries due to the need for metal increasing with population.

Of course, some growth industries are harder to predict than others. This is part of the charm of lithium. Back in the year 2000, silicon was not nearly as valuable as it was in 2010. But in the intervening 10 years, the iPhone and other smartphones and computers took over the world. 

Lithium is currently far less desirable than silicone due to having fewer uses and being harder to get value out of as a result of complex refinement processes. It is hard to imagine a better plastic than silicon for most of the jobs silicon does. It is easy to imagine a better version of lithium.

Whether or not lithium is a growth industry is up to your interpretation. For other people, it will be easily pegged as an income industry. 

What is an Income Industry?

An income industry is an industry that sees investments in the short term but is not expected to grow in the long term. This changes the way that investors move money through it.

Most commonly, investors would rather buy, sell, and trade shares within an income industry wholesale, rather than hold onto the shares to sell them fractionally for small profits over time. 

Time is a big factor in determining whether to invest for growth or income. If you want or need to make your money back in a year at most, then you will basically always be investing for income. If you are planning for the future, such as for a retirement fund, then you will invest for growth instead.

Know Your Strategy and Start Trading

Once you have a concept of how your platform works, the way your industry handles money, and the time frame of your investments, then you can start actually putting money down on ETFs.

It is important to not just know these things though, but to stick with them. 

ETFs hold an appeal for newer investors on the stock market because they are inherently diverse. But if newer investors are known for anything, it is impatience.

Using an ETF as a Newer Investor

If you are one of these newer investors, then the best thing you can do with such a diverse security as an ETF is to pick a direction and stick to it. Do not start investing in a growth industry, then lose your patience and try to make moves that reflect an income-based investment strategy.

This approach will only lose you money in both the short term (you would make more money investing for income in a different industry) as well as the long term (you give up your chance at long term profits by trying to get income out of a growth industry).

Next, we will look at the different kinds of ETFs.

The Types of ETFs ➡️

EFTs come in a variety of different shapes and sizes. The purpose of each of these is to provide different degrees of income generation relative to growth, price management, risks, and rewards. 

Here are some of the ETFs you can invest in on the market:

Stock ETFs

These are the ETFs we have been mainly talking about. They are ETFs that contain a number of stocks from a specific industry. Essentially, they are called “stock ETFs” because the index of the ETF uses the stocks to discern its value, and then provides that value in the form of stocks.

This is definitely the easiest kind of ETF to find, buy, sell, and understand.

Bond ETFs

A bond ETF is actually very similar to a stock ETF in terms of its structure. It is also an index, and it also contains securities from the entire industry that it tracks. But rather than being a bundle of shares from that industry, the security in question is a bond instead.

A bond is a unit of corporate debt. 

That means that a corporation sells bonds in order to acquire money. So, let’s say they sell ten bonds of $10 each. Those bonds all sell, and the corporation gets $100. The bond, however, is not just a share in the company. Instead, it is a document saying that the company who sold it to you will buy it back with a degree of interest in the coming months or years. That is what makes it valuable.

Bond ETFs gather together bonds from different corporations within an industry, giving you access to small amounts of many different corporations’ debts. Their ability to pay this debt can tell you a lot about what is going in the industry in general. It is also a good income investment.

Commodity ETFs

One of the advantages of commodity ETFs is that they are intuitive. Bonds and even stocks have their own quirks that make them hard to perfectly understand. Commodities are easy to grasp because they reflect ownership over something that actually, physically exists.

Oftentimes, a currency will be based in a commodity, like oil or gold.

This is true whether the currency makes it explicit or not. This means two things for a commodity ETF:

  1. They will be more expensive to buy than most ETFs. Since you are taking possession of a commodity that other people would like to use, it is understandable that it would come with a steep asking price. But do not worry, that disadvantage is offset by an advantage.
  2. They will make more money when you sell them. Commodities are things that people need, and those needs, and the supply of the commodity, can vary wildly. This means that they will sometimes be cheaper, but that will be uncommon. What you can always rely on with commodities is that eventually someone, somewhere will have less of the commodity than they need. That is when you have complete control over the price.

Currency ETFs

When you trade in currency ETFs, you are buying indexes of various currencies. The most common way of indexing currencies is according to the “zone” they are in. For instance, South American currencies are frequently exchanges over each other’s borders due to each country’s proximity to the other.

That means a currency ETF can contain a variety of South American currencies. Of course, it can also contain currencies from other geographic zones, such as Europe, Africa, Southeast Asia, and so on.

The defining thing about currency ETFs is not that they make money, but that they indicate where money can be made.

You will not get a huge sum of money from buying currency ETFs alone. ETFs are indexes, and currency ETFs are the most useful as an index rather than as a money-making security.

Instead of selling the currency you buy, you can track its value using the index so that you know which currency to buy, from where, as well as where to sell it.

Applying This to Lithium

Knowing what we now know about how ETFs work, we can start to see the different ways you can make money out of the booming industry around lithium. Let’s list a few methods of approaching it.

  1. Buying lithium commodity ETFs. Like commodity ETFs themselves, this one is highly intuitive. In fact, it is how most people expect to be interacting with lithium. Here, you buy lithium from a number of providers and are able to track its value and sell it off to someone who needs it.
  2. Buying bond ETFs from the companies who mine lithium, or the companies who use it (Tesla, obviously, but also companies that make batteries). You might be hesitant to rely on this strategy, as many people who are new to the stock market are skeptical as to whether any given corporation of significant size issues bonds. The truth is that most corporations do. It is a much faster and easier way of making money than selling products.
  3. Buying stock ETFs, once more of the companies than mine the lithium. This operates on a similar principle as the bond ETF method. The big difference is that while bonds always pay back their money (unless the company from whom you by bonds is a scam), stocks have a lot more risk and a lot more reward built into them.

Generally, you can buy bonds to make an income, and stocks to grow your portfolio.

ETF Investment Strategies 💵️

Investment plan

Investment strategies are always a little hard to grasp for people who are new to the stock market as most of them require a long term time investment and the discipline to execute them.

But investment strategies are also crucial to using the stock market to make any money.

So, here are some investment strategies that make use of ETFs.

1. Fixed Dollar Spending

The easiest strategy to employ in any situation is the one that requires the least decision-making. That is the advantage of a fixed dollar spending strategy. How it works is that at the beginning of every month, you buy the same dollar amount of a single ETF. Again, we will use lithium as an example.

If you spend $100 each month buying lithium stock ETFs, then sometimes you will buy the ETFs when they are cheap and sometimes you will buy them when they are expensive. $100 might get you 2 ETFs, it might get you 10. Employing this investment strategy affords you a few things.

  • You learn patience in your investments
  • You get to see how the market is trending
  • You can hold onto the ETFs for as long as you want
  • You can sell in large amounts if you keep this up for more than a year

That last point is the most important: Few investment strategies work in less than a year.

2. Asset Allocation

One of the most important skills in investment is being able to shift gears and go from a high risk investment plan to a low risk plan. Asset allocation is a plan that yields the most returns from that skill.

The idea behind asset allocation is that you move your money between several similar ETFs. Say, for instance, that all of your money is tied up in profit-seeking bond ETFs. An asset allocation strategy involves moving the money you have tied up in those bonds to more stable and long-lasting stocks.

Stocks are hardly the most stable form of securities however, and therefore you might even shift from stocks to commodities. In short, asset allocation sees you moving the value of your ETFs around to keep it as valuable as possible within the time that you want to keep it invested.

The advantages of this strategy are:

  • Stop-losses are available at all times
  • Your money stays valuable
  • You learn a lot about moving money
  • The goal is not to increase your money, but that will happen if you do it right

3. Short Selling

When it comes to investment strategies, short selling is far more risky than most others. It is also more difficult, meaning that in every sense it is a strategy that is unfriendly to beginners. However… 

Being a high risk strategy also means that it is a high reward strategy.

The process of short selling goes like this: First, you borrow an ETF. You do not buy one, but you pay to take temporary ownership of it. You can sell the borrowed ETF, as long as you pay for its value at the end of the period during which you borrowed it.

That means that if you borrow it on December 1st, you can obligate yourself to either return it on December 31st or buy it on that date. You can sell it between those two dates, but then you have to buy it on the date you were meant to return it. So, how do you make money off of this?

Well, the price you pay for buying the ETF is negotiated when you buy it. If you can borrow it and buy it for $50, but somehow sell it for $100, then you have made a $50 profit. 

This is just an example. If an ETF fluctuates in price that much in a 30 day window then you probably got lucky rather than being skilled. 

The more common way to short sell an ETF is by selling a fraction of it.

In this situation imagine you are borrowing a stock ETF. You get the whole ETF, but each stock inside it has a set price for buying it should you need or want to buy it at the return date.

An individual stock is a lot more likely to suddenly increase in price in such a way that you can short sell it. Of course, the opposite as true as well, and that stock can just as easily plummet in price.

Conclusion 💡️

Lithium is an exciting industry right now. Its dramatic upheavals in price make it so that investment strategies that ordinarily only exist in theory can be put into practice. Now, you still have to be careful with using them. A volatile market is just as good for losing money as it is for making money.

However, ETFs are a versatile tool that allows you to explore even the most niche strategies in this industry. Because lithium involves the stocks of companies, bonds they take out in order to do business, a commodity that is in demand, and several nations’ currencies, you have tons of options.

Just remember these tricks:

  • ETFs contain many different things, whether they are stocks or bonds. You can use them as a group, but you can also deal with them individually to add some nuance to your trading.
  • ETFs are based off indexes, meaning that you can use their values to track what is going on in a wider industry. Do not be afraid to sit with an ETF and observe it before taking a risk.
  • No investment strategy is built to grant substantial returns in less than a year. Be patient with what you buy and resist the urge to be hasty about selling it when it increases only slightly in value.

Keeping these ideas in mind will help you turn your ETFs into high equity investments. All it takes is an understanding of the industry, knowledge of the process, and a whole lot of patience.

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