Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Vulcan’s zero-carbon lithium project takes another step
With the world transitioning to green renewable energy, so too are the energy and resources companies of Australia as they seek to meet the continuing shift in energy generation away from traditional fossil fuel sources.
According to the RBA’s Renewable Energy Investment in Australia bulletin, “Significant coal-fired generation capacity will be retired over coming decades and is likely to be replaced mainly by distributed energy resources and large-scale renewable energy generators, supported by energy storage.”
In this article, we look at Vulcan Energy (ASX:VUL), an emerging lithium miner, which comes under energy storage and exploration.
Demand for lithium batteries has risen remarkably while the price of energy storage has fallen, making lithium a highly sought-after commodity. Fuelling the lithium boom are rising electric vehicle (EV) sales and booming solar power generation, which uses lithium batteries for energy storage.
Based in Germany, Vulcan claims to have developed the world’s first and only “zero-carbon lithium” project with the ultimate goal of producing battery-grade lithium hydroxide from geothermal brines, with a by-product of renewable geothermal energy.
VUL’s share price is up by a whopping 996 per cent this year. The boom has occurred across the entire sector. The company holds Europe’s largest lithium JORC Resource at 13.95mt at its zero-carbon lithium project in Germany. It will be a dual operation, producing 74 MW of renewable energy generation and approximately 40,000 tonnes a year of lithium. The VUL share price hit an all-time high of $16.65 on 13 September 2021 : it has a market capitalisation of $1.6 billion.
VUL recently announced a deal with French automaker Renault for the supply of lithium whilst its collaboration with Rosberg X electric racing team is aiding the business. But more importantly, VUL announced the successful production of its first battery-quality lithium hydroxide monohydrate (LHM) from pilot operations.
According to the announcement, “the sample exceeds traditional battery -grade LHM product including best on the market battery grade specifications required from offtake customers, at greater than 56.5% LiOH.H2O and very low impurities.”
Further production of battery quality material will continue to ramp-up to supply Vulcan’s offtake partners with samples. Vulcan is targeting Phase 1 commercial production for CY2024. It has a large resource and aims to produce lower CO2. VUL is on the way to becoming a major supplier of lithium chemicals into European Union markets. This announcement is a positive step in the right direction, boosting investor confidence in its mission to supply the European market.
Recent share price weakness has seen the share price pullback to $13.15 from its $16.65 September high. Vulcan recently completed a $200 million raising; it is cashed-up and backed by Gina Rinehart. Funds raised will be used to progress its zero carbon lithium development in Europe, which also has an offtake agreement with electrical goods company LG. The resource is strategically located in the heart of Europe’s auto and EV battery industry, in Germany: Europe is the fastest growing lithium market in the world.
Research is limited but German firm AlsterResearch, has a price target of $22 – that’s 67 per cent above the current share price.
