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Vulcan Energy hauls in $109m to fast-track European lithium project

Updated: May 20

Vulcan Energy Resources’ geothermal plant and pilot lithium extraction operation in Germany’s Upper Rhine Valley. Credit: File

Vulcan Energy has opened its order book to purchase long lead capital expenditure items to start construction of its German-based phase one lithium plant and geothermal renewable energy plant, fully funded by a €66m (AU$109m) placement.

The company will also use the raised funds to drill extra production-reinjection wells to increase brine flow, in addition to acquiring land for lithium extraction plant and brine production sites.

Launched by joint lead managers Canaccord Genuity and Merrill Lynch, a clutch of deep-pocketed private investors have taken stock of 21.4 million new fully-paid ordinary shares issued at $5.10 a pop – a 17.2 per cent discount to yesterday’s close of $6.16.

Global investment manager Bailie Gifford is just one of several well-known investors joining the Vulcan chorus.

We would like to sincerely thank our existing shareholders for their continued support and welcome our new shareholders, including ESG-focused institutional investors, onto the register. The ~300-strong Vulcan team remains focused on the execution of Phase One of our industry-leading Zero Carbon LithiumTM Project, providing the European market with critically-needed secure supply of sustainable, battery-grade lithium hydroxide for the electric vehicle market, as well as increased renewable energy supply for energy and climate security. The Placement positions us to continue delivering our integrated renewable energy and lithium project execution strategy, in line with the recently published DFS development plan. Vulcan Energy managing director and chief executive officer Dr. Francis Wedin

Vulcan’s ground-breaking mining model seeks to extract the sought-after battery metal from lithium-laden hot brines percolating deep below Germany’s Upper Rhine Valley.

While more than 60 per cent of global lithium production is sourced from such brines, Vulcan’s competitive – and green – edge is that the heat at which these brines bubble to the surface is capable of generating power courtesy of standard geothermal technology, with zero carbon emissions.

After extraction of geothermal energy and lithium, the brine is reinjected back into the bedrock to make a closed-loop process with minimal impact on the surrounding environment.

With its sights set firmly on a 2025 production target, Vulcan is stepping up to help solve Europe’s looming lithium supply shortfall, with production forecast to supply up to 24,000 tonnes per annum of lithium hydroxide monohydrate to the local European Union market.

At the same time, Vulcan’s geothermal renewable energy plant will pump 300-gigawatt hours annually into Germany’s power grid, steering the European nation away from Russian-sourced gas supplies and towards its lofty 2050 carbon-neutral goals.

Tallied up, the Perth-based company is targeting production of enough renewable heat for more than one million people per year by 2030 and enough lithium hydroxide for one million electric vehicles annually, while avoiding the emission of one million tonnes of carbon dioxide each year.

The targets are bold, but they are resonating with off-take partners and governments alike.

Letters of intent have already been secured from French, Italian and Canadian government-backed Export Credit Agencies as Vulcan aims to have its entire debt and equity project funding in place by the first quarter of next year.

The company has also signed off on a long list of binding lithium offtake agreements with some of the world’s most notable cathode, battery and car makers including Renault, Volkswagen, Umicore and Stellantis.

Interestingly, Stellantis – the manufacturer of Peugeot, Maserati, Fiat, Chrysler and Alfa Romeo, to name a few – is Vulcan’s second-biggest shareholder.

Just last week, the company announced it had entered a strategic partnership with big European chemical producer Nobian. Under the terms of the agreement, Nobian will tip €161m (AU$265m) into a 50/50 joint venture (JV) vehicle earmarked to build Vulcan’s proposed €322m (AU$530m) lithium hydroxide plant in Germany.

The hydroxide plant, which is the subject of the proposed Nobian deal, will be constructed in Frankfurt and converts lithium chloride sourced from the brines to lithium hydroxide monohydrate for the JV to sell back to Vulcan for distribution to its European customer base.

Earlier this year, the company silenced its naysayers with the results of a definitive feasibility study into phase one of its operation, which claims an extraordinary €3.9 billion (AU$6.3 billion) pre-tax net profit value with an internal rate of return of 34 per cent on the €1.5 billion (AU$2.4 billion) CAPEX outlay.

After a payback period of three and half years, the project is expected to churn out an impressive integrated annual revenue of more than €700 million (AU$1.1 billion).

To haul in more than AU$100m in a private placement speaks volumes to Vulcan’s ground-breaking carbon-neutral renewable energy and lithium project at a time of gyrating global financial markets. With chunks of funding for high CAPEX items firmly squared away, Vulcan is edging closer to its 2025 production target for its high-stakes lithium play.

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