The Global Opportunity Elon Musk Just Touted As “A License To Print Money”

The Global Opportunity Elon Musk Just Touted As “A License To Print Money”
Reda Farran, CFA

over 1 year ago1 min

Mentioned in story

During Tesla’s second-quarter earnings call, Elon Musk promised riches to any company that invests in lithium refining, saying: “You can’t lose. It’s a license to print money”.

Musk’s argument is that lithium mining – extracting raw lithium deposits from hard rocks or brine reservoirs – is relatively easy. But lithium refining – converting the raw lithium into compounds that are essential to EV batteries – is much harder, requiring a massive amount of machinery and know-how. That might be why there’s a shortage of global refining capacity today, which has sent prices soaring: you can see above that Chinese lithium carbonate prices – to take one key material – have jumped almost 450% in the past year.

Musk added that there are software-like profit margins to be made in lithium refining – that is, the companies that do it will make a lot of profit from every dollar of revenue. He’s not wrong: the five firms that dominate lithium refining – Albemarle, SQM, Ganfeng Lithium, Tianqi, and Livent – have all forecasted 2022 net income margins of between 25% and 45%, compared to software giant Oracle’s forecasted net income margin of 29%. And in the corporate world, that might be as close to printing money as you’ll get…

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