When the Vulcan Energy Resources Ltd (ASX: VUL) share price started to move recently, it put the returns of most shares to shame.
The lithium company's shares were trading at less than 20 cents in late 2019 to early 2020 before running as high as $14.20 on 19 January 2021.
But for investors with the fear of missing out or chasing highs, this has likely ended in tears as the Vulcan share price has started to give back some of its extraordinary returns.
After hitting its all-time record high of $14.20, its shares have more than halved to close at $6.18 on Tuesday. Even in recent weeks, the Vulcan share price has fallen some 17%.
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Why is the Vulcan share price falling?
The timing of the Vulcan share price slump has coincided with broader weakness across ASX lithium shares. This includes the Orocobre Limited (ASX: ORE) and Pilbara Minerals Ltd (ASX: PLS) share prices experiencing a similar pattern.
These ASX lithium shares have rallied in recent months following a recovery in lithium spot prices and a resurgence in investor interest in the renewables sector. By late January 2021, ASX lithium shares largely topped out and drifted lower by February.
While Orocobre and Pilbara are established lithium producers, Vulcan is still in its early days with development work such as a definitive feasibility study to finish in the third quarter FY22 and production expected to start in Q3 FY24.
Vulcan had also recently completed a $120 million capital raising at a placement price of $6.50 per share, a 17.1% discount to its last closing before the capital raising.
Capital raisings can weaken a company's share price in the short-term as it dilutes existing shareholders. The discount also means that those who participated in the capital raising could sell their new shares at a profit.
Looking ahead
Despite the recent weakness in the Vulcan share price, there are exciting times ahead for the world's first and only zero-carbon lithium project.
The company cites that it possesses the largest resource size in Europe, with 15.85 million tones of lithium carbonate equivalent.
The company has planned to complete the development work by Q3 FY22, including pilot test work, a definitive feasibility study and project financing.
Its scheduled drilling will follow this in Q3 FY22 and plant construction in Q1 FY23. If all goes to plan, the company could hit producer status by 2024.
