'You can't lose': Which ASX lithium shares operate in Musk's sweet spot?

One key step in the lithium value chain gets Elon Musk's attention.

| More on:
A little girl has a huge smile and a giant lollipop.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Tesla's Elon Musk describes lithium refining as a 'license to print money' 
  • Musk further stated there to be 'software margins' in lithium processing 
  • ASX lithium shares are soaring today following the comments 

It is shaping up to be a relatively solid day for ASX lithium shares on Thursday. At the time of writing, the majority of companies on the ASX associated with the all-important battery commodity are in the green.

However, as Tesla Inc (NASDAQ: TSLA) techno-king Elon Musk outlined during the electric vehicle (EV) manufacturer's earnings call this morning — not all lithium companies are created equal. In fact, there is one specific part of the lithium value chain in which Musk sees immense economic reward.

Let's take a closer look at what Musk said and the ASX lithium shares it might involve.

Money printing machine within lithium?

This morning, shareholders listened attentively to Tesla's second-quarter earnings call. But for some investors, Elon Musk's comments around lithium took centre stage. In answering a question about how inflation will affect EV prices, Musk shared his insights into the lithium industry.

For most commodities, we're seeing a downward trend towards the end of this year or next year. Some commodities… the processing of lithium is insane. I'd like to once again, urge entrepreneurs to enter the lithium refining business.

On initial inspection, Musk's expectation for commodity prices to trend lower may not sound too optimistic for ASX lithium shares. However, the serial entrepreneur quickly draws a line in the sand, putting 'lithium refining' in a separate category.

Elon Musk reiterated the attractive economics offered in lithium refining at the moment, stating:

It [lithium refining] 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, it's a license to print money.

ASX lithium shares soar in response

Following this morning's comments, many ASX lithium shares have gone on a stampede to the upside. For example, here are some of the best-performing lithium companies today:

However, as per Musk's comments, it is the lithium refiners of particular interest. Novonix could be garnering the highest performance as its synthetic anode production might be more accustomed to refining than mining.

Likewise, IGO Ltd (ASX: IGO) is another ASX lithium share that could soon be categorised as a refiner. On 20 May 2022, the mining company announced that its first battery-grade lithium hydroxide had been produced from the Kwinana refinery.

Motley Fool contributor Mitchell Lawler has positions in Tesla. 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.

More on Resources Shares

Miner holding cash which represents dividends.
Dividend Investing

Invested $8,000 in Fortescue shares 5 years ago? Guess how much passive income you've banked!

Fortescue is popular among passive income investors for paying two fully franked dividends per year, even during COVID.

Read more »

Miner looking at a tablet.
Resources Shares

BHP shares are up 9% in a month. Are they still good value?

Is Australia’s largest miner a big opportunity?

Read more »

Three miners wearing hard hats and high vis vests take a break on site at a mine as the Fortescue share price drops in FY22
Resources Shares

Did you catch what happened with the big 3 ASX 200 mining stocks in April?

BHP, Rio Tinto, and Fortescue all reported their latest mining results in April.

Read more »

Miner looking at a tablet.
Resources Shares

After its earnings result, what's Macquarie's price target on Fortescue shares?

Let’s dig into what Macquarie thinks of Fortescue after its quarterly update.

Read more »

Two mining workers on a laptop at a mine site.
Resources Shares

The Mineral Resources share price is down 72% in a year. Time to pounce?

Two top experts ran their slide rules over Mineral Resources shares. Here’s what they found.

Read more »

Miner looking at a tablet.
Resources Shares

Mineral Resources share price shoots 15% higher on third-quarter report

The ASX 200 iron ore and lithium giant has released its 3Q FY25 activities report.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

Why Macquarie says this ASX 200 mining stock could rocket 67% in a year

Macquarie forecasts a big potential rebound for this diversified ASX 200 miner.

Read more »

Female miner smiling at a mine site.
Resources Shares

3 reasons why the Fortescue share price could still be a buy

Here’s why I view Fortescue as an opportunity.

Read more »