Why is the Vulcan Energy share price leaping 7% on Thursday?

Happy woman on her phone while her electric vehicle charges.Happy woman on her phone while her electric vehicle charges.

The Vulcan Energy Resources Ltd (ASX: VUL) share price is surging today after electric vehicles (EV) pioneer Elon Musk described lithium processing as “a licence to print money” with “software margins”.

Vulcan Energy hopes to become a producer of high-purity lithium hydroxide for European EV manufacturers. Its Zero Carbon Lithium Project aims to produce both renewable geothermal energy and lithium hydroxide from the same deep brine source in the Upper Rhine Valley in Germany.

So, it’s little wonder that ASX investors appear to have reacted positively to Musk’s comments.

At the time of writing, the Vulcan Energy share price is up 6.8% to $6.95.

Did Elon Musk just boost the Vulcan Energy share price?

Musk made the comments during a Q&A with institutional investors today. The Q&A was part of the Q2 FY22 presentation from Telsa Inc (NASDAQ: TSLA).

Musk said:

The mining is relatively easy, the refining is much harder. There’s lithium pretty much everywhere but you have to refine the lithium into battery-grade lithium carbonate and lithium hydroxide, which has to be extremely high purity.

So it is basically like minting money right now. There’s like software margins in lithium processing right now. So I really like to encourage once again, entrepreneurs who enter the lithium refining business, you can’t lose — its a licence to print money.

The lithium price rollercoaster

The price of lithium carbonate has soared over the past 18 months to a peak of about US$73,570 in March. It has been more volatile in recent times.

Overnight, the value of lithium was steady at US$70,318 per tonne. That’s up 434.27% year over year.

New lithium miners have cropped up all over the world to cash in on the boom, with an anticipated increase in supply likely to weaken the price of the commodity. That’s according to top broker Goldman Sachs, which issued a bearish outlook for ASX lithium shares in June.

In the Q&A, Musk acknowledged that commodity prices were decreasing.

Musk said: “…for most commodities, we’re seeing a downward trend towards the end of this year or next year.”

What’s the latest from Vulcan Energy?

In a corporate presentation released to the ASX on 12 July, Vulcan outlined its progress in its lithium division.

This included the ongoing scaling up of its Pilot Plant 1, with ‘live’ geothermal brine being used to create “consistent lithium concentration and low level of impurities”.

It also expects to commission the construction of its much larger demonstration plant in late Q4 2022. The company said 80% of the equipment was now ordered, and design work was being finalised.

Other ASX lithium shares also up today

Other ASX lithium shares have surged along with the Vulcan Energy share price following Musk’s comments.

Pilbara Minerals Ltd (ASX: PLS) shares are up 2.6%, the Allkem Ltd (ASX: AKE) share price is up 1.4%, while shares in IGO Ltd (ASX: IGO) are up 0.6%.

In comparison, the All Ordinaries Index (ASX: XAO) is up 0.2%.

The post Why is the Vulcan Energy share price leaping 7% on Thursday? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has positions in Allkem Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. 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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