ASX year in review: Biggest gainers

2021 has proven to be a prosperous year for investors.

The ASX 200 made a last minute dash towards all-time highs but fell short on the last day of trading, down 0.5% on Friday.

Overall, the index gained 11.8% year-to-date and up 4.3% on pre-covid highs.

The year was again inundated by covid headlines, driving an ebb and flow of panic and relief buying. 

Equity markets remained well supported by ample stimulus and ultra-low interest rates. This was particularly the case in the US, where the Federal Reserve balance sheet ballooned from US$7.3 trillion to US$8.7 trillion.

In terms of ASX top performers, stocks in lithium, batteries and clean energy solutions topped the leaderboards as investors pooled into sustainability-related plays.

 Here’s your top performing class of 2021 (above $300m market cap) 

1. Sayona Mining (ASX: SYA) +1,355% 

2. Lake Resources (ASX: LKE) +1,269%

3. Novonix (ASX: NVX) +665%

4. Cettire (ASX: CTT) +663%

5. Develop Global (ASX: DVP) +563% 

6. Calix (ASX: CXL) +480%

7. Galan Lithium (ASX: GLN) +402%

8. Liontown Resources (ASX: LTR) +393%

9. Neometals (ASX: NMT) +393% 

10. FireFinch (ASX: FFX) +361%

Lithium is king 

Lithium prices soared in 2021 amid increasing electric vehicle uptake and scant supply. 

According to the Australian Government’s commodity forecaster, the Office of the Chief Economists (OCE), world demand for lithium is estimated to increase to 486,000 tonnes of lithium carbonate equivalent (LCE) in 2021, from 305,000 tonnes in 2020. Demand is forecast to reach 724,000 tonnes by 2023.

“At this stage, supply from mine and brine operations is falling short of matching demand growth. Project development is underway, but will take time to fill the supply gap,” the OCE said in its December Resources and Energy quarterly. 

From a pricing perspective, lithium spodumene prices rose to US$2,240 a tonne in the September quarter, a five-fold increase since the start of the year. 

Interestingly, none of the top performing lithium stocks have entered into the production phase just yet. 

10-bagger status 

Sayona Mining topped the leaderboards in a breakthrough year in terms of M&A. The company successfully acquired North American Lithium (NAL) in Quebec, with its strategic investor and major shareholder, Piedmont Lithium (ASX: PLL). 

The market leading gains from Sayona has seen its shareholder base expand enormously from approximately 4,600 shareholders in September 2020 to around 27,000 by December, according to the company’s 21 December drilling announcement. 

Sayona isn’t far off from reaching producer status, targeting first spodumene production at NAL by mid-2023. 

Likewise, it has been a busy year for emerging clean lithium producer, Lake Resources. 

The company’s flagship Kachi Project has been highlighted as one of the 10 largest brine resources globally, whereby 25 years of production would only use about 20% of its resource. 

Lake Resources has undergone an aggressive drill program which continues to “reinforce prior lithium assay results and indicates lithium brines extend well beyond the limits of the current resources”. 

In the context of its project production timeline, Lake Resources is currently working on its definitive feasibility study, which is expected to be completed before the second quarter of 2022. 

If all things go to plan, the company expects construction to commence at Kachi in mid-late 2022 for 2024 production. 

2022 for lithium 

Lithium stocks are in some ways priced to perfection, with many emerging producers trading well above project net present values (NPV). Liontown Resources and Core Lithium (ASX: CXO) being the main culprits. 

That said, lithium is also a strategic resource that’s becoming increasingly difficult to source, given the ongoing demand and supply dynamics. 

As we’ve seen this year, as long as spot prices continue to climb, investors don't seem to have no issues with sky high valuations. 

The OCE forecasts spodumene prices to rise to an average of US$1,185 a tonne in 2022 from an estimated US$720 a tonne in 2021. However, it expects prices to fall back to US$990 a tonne in 2023.

Lithium hydroxide prices on the other hand, are forecast to rise from US$7,300 a tonne in 2020 to US$18,940 a tonne in 2023.

Lithium hydroxide is produced from brine and decomposes at a lower temperature, allowing it to produce more sustainable battery cathodes with a longer lasting final product.

Globally, there is a priority on improving supply, but after a two-year lithium bear market between 2018-2020, that process will take time.