2 ASX lithium shares to buy in May 2022: brokers

a smiling woman holds an arm in the air as she holds a fully-charged battery symbol with her other hand.

a smiling woman holds an arm in the air as she holds a fully-charged battery symbol with her other hand.

Experts are liking the look of some ASX lithium shares. The growing interest in lithium stocks comes on the back of escalating lithium prices on global markets over the past year.

In fact, one Australian lithium miner has just achieved a price of US$5,650 per dry metric tonne of spodumene concentrate through a Battery Material Exchange (BMX) auction.

Here are two lithium ASX shares rated as buys by brokers:

Pilbara Minerals Ltd (ASX: PLS)

Pilbara is the business that just benefited from that auction.

The company also said there was a “strong sales price dynamic” during the three months to March 2022. Further, battery grade chemical pricing is suggesting another “significant step-up” in the offtake concentrate sales price during the quarter for the three months to June 2022.

The ASX lithium share said that its production of 81,431 dry metric tonnes for the last quarter was impacted by “resourcing shortfalls” in staff and contractors due to COVID-19 impacts and the tight labour market.

It generated operating flow of $113.9 million and it’s investing in projects to capture more of the lithium value chain. Pilbara said a scoping study has provided preliminary support for the development and construction of a demonstration plant chemicals facility at Pilgangoora, producing value-added lithium phosphate salts through a calcination and refining process.

The broker Citi rates Pilbara as a buy, with a price target of $3.60 because of the strong pricing environment. That implies a potential rise of more than 20%.

Allkem Ltd (ASX: AKE)

Allkem is another ASX lithium share that is benefiting from the rise in the lithium price. Over the last year, the Allkem share price has risen by more than 80%.

This company has a strategy to increase its lithium production threefold by 2026 and maintain a 10% market share of the global lithium market over the next decade.

In the three months to March 2022, Mt Cattlin produced 48,562 dmt of spodumene concentrate, generating revenue of US$143.8 million. The Olaroz lithium facility produced 2,972 tonnes of lithium carbonate with sales of 3,157 tonnes, generating revenue of US$86 million. It said that lithium carbonate prices for the fourth quarter of FY22 are expected to be approximately US$35,000 per tonne.

Allkem’s group gross operating cash margin was approximately US$189 million which, it said, reflected “strong market demand and high sales prices”.

The ASX lithium share said that Olaroz stage 2 reached 77% construction completion with first production expected to commence in the second half of the calendar year. At Naraha, plant commissioning works will occur during the three months to June 2022 with first production expected in the three months to September 2021. Pond construction at Sal de Vida stage 1 started in January and first production is expected in the second half of 2023.

Citi also rates Allkem as a buy, with a price target of $16. That’s a potential rise of 30% over the next year if the broker ends up being right.

The post 2 ASX lithium shares to buy in May 2022: brokers appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison 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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