Insights

Vulcan (ASX:VUL) share price sinks 20% after responding to short seller

This lithium share is being crushed on Friday…
The post Vulcan (ASX:VUL) share price sinks 20% after responding to short seller appeared first on The Motley Fool Australia. –

The Vulcan Energy Resources Ltd (ASX: VUL) share price has returned from its trading halt and is crashing lower.

At the time of writing, the lithium developer’s shares have dropped 20% to $12.05.

Why is the Vulcan Energy share price crashing?

As well as releasing its quarterly update this morning, the company responded to a scathing report from short-focused activist investor J Capital.

In response, Vulcan stated that the report contains many claims that are wrong and misleading.

Vulcan Energy’s Managing Director, Dr. Francis Wedin, stated: “Vulcan Energy Resources is a world class company dedicated to decarbonisation, with world class technical experts.”

“Vulcan’s goal is to be a world leader in sustainable lithium production and to create the world’s first fully integrated renewable energy and battery raw minerals company. While any misinformed short selling attack is disappointing, we are buoyed by the support of our leading institutional investors in understanding the project’s technical detail – and risks.”

Nevertheless, this support from institutional investors hasn’t been enough to stop the Vulcan share price from sinking today. This may be due to the uncertainty that the report highlights and the significant future value that its already priced into the Vulcan share price.

What else did Vulcan say?

Below is a summary of some key points of the response. To read the response in full detail, you can click here.

J Capital claims: “Research by the U.S. Department of Energy published in May 2021 states that the cost to produce a ton of lithium carbonate using DLE will be around $4,000. That would put Vulcan’s project in the highest quartile of cost. Every expert we spoke to believes costs will be at the high end of the cost curve.”

Vulcan refutes this, stating that its cost per tonne is expected to be $2,640. Furthermore, even a cost per tonne of $4,000 would not be in the highest quartile of cost. Rather it would still be the lowest quartile of cost for lithium carbonate for current production.

The company also highlights that the report claims the Upper Rhine Valley has much lower lithium grades than in the Salton Sea. However, Vulcan notes that the grades are actually similar.

In response to criticism of its employees, Vulcan stated that it stands by every one of its employees, noting that many of them are highly respected globally and do not have a “record of failure”, as J Capital claims.

What else?

Another concern J Capital has are the flow rates that will underpin the geothermal power at the Zero Carbon Lithium project.

However, management responded: “As Vulcan stated 11 times within its PFS publication, we have not drilled any geothermal wells into our greenfields development areas, and until we do so, as we have already stated on numerous occasions, risks around flow rate will remain. Vulcan believes it has an appropriate level of confidence around its assumptions surrounding flow rates, based on the experience of its team, and state-of-the-art scientific tools, data and studies as elaborated below.”

“Vulcan has, based on its detailed analysis and the various factors mentioned above, used between 100 and 120l/s as assumed flow rates for its projects in its PFS. The Report incorrectly suggests that Vulcan should base its flow rates off some of the first wells drilled in the area, including a well drilled 41 years ago in 1980, without the benefit of 3D seismic data and industry best practice and learnings,” it added.

What’s next?

Unfortunately for shareholders, one report is rarely where it ends.

J Capital and other short sellers will often respond to the company’s response soon after. So investors may want to keep an eye for that and on the Vulcan Energy share price.

The post Vulcan (ASX:VUL) share price sinks 20% after responding to short seller appeared first on The Motley Fool Australia.

Should you invest $1,000 in Vulcan right now?

Before you consider Vulcan, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Vulcan wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

What’s going on with the Vulcan Energy (ASX:VUL) share price today?

Why is this ASX lithium explorer being targeted by activist investors?

Could the Vulcan Energy (ASX:VUL) share price hit $22 by the end of 2021?

Which ASX 300 shares are leading the way on Monday?

Why MyDeal, Senex, Superloop, and Vulcan shares are surging higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!