Elon Musk's bold words gives ASX battery metals stocks a sugar hit

• Elon Musk has the ability to move share prices, but it’s only short term
• What happened with ASX stocks after “Battery Day”
• Why the star of the show, nickel, didn’t get investors riled up

When Elon Musk, the boss of the world’s biggest electric carmaker, stands up and speaks, people obviously listen. That’s good news for ASX battery metals stocks… briefly.

That’s because investors all pile into the stocks linked to whatever material Musk says he’s going to use more of in his electric vehicles.

But bold claims and speculation will only buoy stocks for so long. On Wednesday, Telsa’s so-called “Battery Day” gave ASX-listed battery metals stocks a sugar hit for a couple of hours before most ended the day close to, or in some cases lower than, where they started.

“Like most Tesla events, speculation and hype were at all-time highs after CEO Elon Musk hinted that something ‘very insane’ would be revealed,” Wood Mackenzie’s Battery Raw Materials team and Energy Storage Service team said.

“Tesla detailed a completely new cell, along with plans to improve manufacturing, costs and shrink the battery supply chain. With such bold claims come many questions.”

Firstly, a recap:

Telsa intends to use more US-sourced nickel in its cathode battery production and less cobalt.

The company will take a three-tiered approach to battery development starting with iron-based batteries for long-life cycle cathodes for stationary storage and where energy density is not paramount.

Then nickel-manganese for medium-life batteries, and high nickel for long-range vehicles like Tesla’s EV Cybertruck.

Cue the rush into ASX-listed battery metals stocks, which is exactly what happened on Wednesday.

ASX jumps on several speeding stocks

Several ASX battery metals stocks found themselves forced into a trading halt and having to front share price queries from the local bourse.

Euro Manganese (ASX:EMN) was one that pointed the finger at Musk after its share price spiked by 63 per cent to an intra-day high of 22c and nearly 11 million shares changed hands.

“During this presentation, Mr Musk disclosed several technological advances it proposes to implement to materially lower the cost of producing lithium-ion batteries and electric vehicles, including Tesla’s plan to begin manufacturing at a very large scale an innovative type of lithium-ion battery with a cathode that contains around 33 per cent manganese, made directly from manganese metal,” the company told the market late Wednesday.

“Tesla also disclosed that it intends to build its own cathode factory and to purchase raw materials directly from mining companies.

“Until now, Tesla had used EV batteries manufactured by third parties, such as Panasonic, using principally an NCA (nickel, cobalt, aluminium) formulation, which contains no manganese.

“The introduction of manganese in Tesla batteries is expected to result in a material increase in high-purity manganese demand.”

Euro Manganese’s goal is to eventually produce battery-grade, high-purity manganese products, including high-purity manganese metal from its Chvaletice project in the Czech Republic.

Share price run short lived

EcoGraf (ASX:EGR), meanwhile, rocketed over 76 per cent to a daily peak of 30c after it released a presentation based on Tesla’s Battery Day.

The company is building a 20,000-tonne-per-annum battery graphite facility at Kwinana in WA to supply “high quality and cost competitive” purified spherical graphite for the lithium-ion battery market.

EcoGraf managed to escape being issued a please explain. And it closed Wednesday only half a cent up on the previous day.

As did another battery materials player, Novonix (ASX:NVX), which also went for an insane run after putting out a response to the key topics discussed by Musk.

Novonix said it had made “significant progress” in its anode material business with founder customer Samsung and with Sanyo Electric, part of Panasonic Group.

Panasonic has produced battery cells at Tesla’s Gigafactory in Nevada, but the partnership is in some doubt after Musk announced that Tesla was going into battery production.

Novonix said its battery cell technology had demonstrated an ability to exceed 1 million miles, a holy grail in performance terms for the EV industry.

However, the company closed Wednesday down 10.6 per cent on the previous day.

But what happened to the nickel players?

And then there’s the nickel stocks – after all, that was the star of Tesla’s show. Interestingly though there didn’t seem to be the same level of interest in the nickel explorers.

Chalice Gold Mines (ASX:CHN) was fortunate enough to get two kicks to its share price this week.

First, it jumped nearly 30 per cent on Tuesday after announcing it had found three anomalies, including the 6.5km-long Hartog anomaly, at its headline making Julimar nickel-copper-platinum group elements (PGE) project.

The stock then climbed a further 16 per cent to $2.63 on Wednesday. That could just be residual investor excitement over Chalice’s latest discovery, or that combined with Musk’s spruiking of nickel.

Blackstone Minerals (ASX:BSX), which is resource drilling in Vietnam and investigating the potential to develop processing infrastructure to produce a downstream nickel and cobalt product for Asia’s growing lithium-ion battery industry, edged up only slightly.

Even the nickel producers didn’t budge that much — Western Areas (ASX:WSA) edged up 4.6 per cent to an intra-day high of $2.27.

Nickel exploration success is limited

Guy Le Page, director and responsible executive at Perth-based financial services provider RM Corporate Finance says nickel is one of the more volatile metals because it’s so hard to find and exploration success is few and far between.

“There’s a huge amount of speculative money around and once that nickel market gets going, the returns can be quite spectacular,” he told Stockhead.

“But the real problem is the exploration success is so limited and the other thing that I think needs to be borne in mind, if there is a big uptake of nickel in batteries it needs sulphide nickel and most of the new production is coming out of Indonesia which is laterite.”

Wood Mackenzie sees the battery raw materials supply as one of the biggest barriers to rapid EV adoption.

“Bringing on new mines is no easy feat,” the mining research consultancy said.

“Tesla revealed several new initiatives that would bring battery chemicals production much closer to home.

“The first was the development of a North American cathode facility. Not only will this reduce the carbon footprint of the cell but will allow the company to have greater control on its input materials.”

Tesla breaking into the mining space

The other big factor that could change the game is Tesla’s move upstream into mine production.

“Not only has the company acquired a lithium deposit in Nevada, but it claims to have developed a novel lithium extraction method,” Wood Mackenzie said.

“According to Tesla’s estimates, using its new extraction and processing technology, lithium in Nevada would be enough to support the electrification of the entire US vehicle fleet.”

There is also the big question of when Musk’s ambitions go from being a pipedream to reality.

“Tesla’s 2020 Battery Day was full of ambitious plans, ground-breaking technology and endless optimism,” Wood Mackenzie said.

“The handful of novel technologies presented will need time to be proven and commercialised.

“The real key takeaway is that if everything goes to plan, it will only be after 2023 that Tesla will be able to make the low-cost electric vehicle needed for mass-market adoption.”