Which ASX lithium miner should you invest in?

In the long-term I expect the prices for commodities such as iron ore and oil to be weighed down heavily by increasing levels of supply and falling demand.

But one commodity that I am bullish on in the long-term is lithium. Thanks to its use in the batteries of electric vehicles, smart devices, and renewable energy, demand is expected to outstrip supply for many years to come.

Especially given recent developments in Europe  which saw both the UK and France put plans in place to ban the sale of internal combustion engine vehicles by 2040.

With nations across the world battling pollution, I don’t believe these two nations will be alone in making this decision.

I believe that this is likely to mean that the sky high prices that the lithium miners are enjoying today will be around for at least the next decade.

Avz Minerals Ltd (ASX: AVZ)

Although it is still at the exploration stage, the company’s Manono lithium project in the Democratic Republic of Congo could have significant potential. The company recently released the results of the first of seven drill holes at Manono which revealed the presence of high-grade lithium mineralisation. Whilst it might be a little early to invest, I believe the company is well worth keeping a close eye on.

Galaxy Resources Limited (ASX: GXY)

Galaxy is without doubt my first preference in the industry. While its world class Mt Cattlin operation is my main attraction to the company, the company’s Sal de Vida lithium brine deposit in Argentina has huge potential. The company estimates this deposit alone has the potential to generate total annual revenues in the region of US$215 million and operating cash flow before interest and tax of US$118 million per annum at full production rates for a 40 year period.

Kidman Resources Ltd (ASX: KDR)

This junior lithium miner would be my second choice in the industry due to its Mt Holland Lithium Project. Although the company gave up half of the asset to Sociedad Química y Minera for US$110 million last month, I feel the share price decline that followed the decision has left its shares trading at a reasonably fair price for a long-term investment.

Orocobre Limited (ASX: ORE)

Whilst Orocobre’s South American assets could make it a great option in the industry, the fact that the company has downgraded its production guidance twice this year doesn’t fill me with a lot of confidence. Especially with short sellers targeting the company’s shares. At present Orocobre is the second-most shorted share on the ASX with short interest of 19.3%.

The lithium miners are highly volatile though and potentially unsuitable for many investors. If this is you, then I would suggest you look at these hot stocks instead.

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Motley Fool contributor James Mickleboro owns of shares of Galaxy Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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