$4.8M Institutional and ESG Investor Equity Placement
Firm commitments received for a $4.8 million equity placement (before costs) to institutional and sophisticated investors ("Placement").
Placement significantly oversubscribed involved insititutional investors in Australia and Europe and was strongly supported by investors from the Enviornmental, Social, Governance ("ESG") sector.
Funds raised to acclerate Vulcan's Pre-Feasibility Study ("PFS") and pilot plant development at its globally unique Zero Carbon Lithium Project in Germany.
Disclosure: I no longer hold.
VSA Capital Podcast Episode 36, Dr Francis Wedin, MD of Vulcan Energy and former director of Exore.
"VUL - best peforming lithium stock in the world"
Enables fast-track potential growth of Vulcan’s 13.95MtLCE Resource Estimate and upside to Positive Scoping Study in PFS
Managing Director, Dr. Francis Wedin commented:
"Thanks to the hard work of our in-country team, this purchase option agreementsecuresaccess to acriticalpackage of data,which has the potential to fast-track the development of severalareas within the Vulcan ZeroCarbon Lithium™Project. Seismic data is an important tool for the development of geothermal brines, to sensibly manage and reduce the geological risk associated with production drilling targeting high-flow rate zones, which will form the basis of our combined renewable energy and lithium hydroxide project. Typically, there is significanttime and financial cost associated with acquiring this data in the field, but with this package, we will have effectively short-cut this process and substantially reduced the cost. These areas were not part of Vulcan’s resource estimate or Scoping Study1, so represent potential upside in our Pre-Feasibility Study for this year.”
With this acquisition Vulcan canfast-track:
-over a year of exploration time.
-approximately70% of the survey cost.
And a seperate announcement:
Listing Rule 5.3.4 AdditionalDisclosure
Summary: VUL appear to be using their money more efficiently then projected.
•Management (Francis 21%, Horst 1%, Gavin 7.5%) has a high ownership in the company with lots of recent insider trading.
•Passionate management - Francis has stated he’s enjoying waking up everyday to pursue his passion and his dream.
•Honest and talented management – they’re hiring the right people and need to keep doing so – 2 Phds (Dr Francis Wedin and Dr Kreuter) and are honest with their admission of possible risks and future dilution/cap raising requirements
•Management compensation: unknown
•Dual revenue generation: sell zero carbon lithium hydroxide and sell geothermal energy back to grid – dual revenue de-risks overall operation
•Serves customers across economy, markets, and geography (throughout Europe)
•Stable environment – largest lithium resource in Europe and one of largest in world and is large enough to be Europe’s primary source of battery quality lithium hydroxide. Demand for product with big push towards EV (electric vehicles) in Europe.
•Possess moat/first mover – world’s first and only zero carbon lithium process, located in centre of fastest growing market removing dependence on China for raw materials. Only other known geothermal field with similar lithium grades and flow rate is in California.
•Can fast track production d/t existing infrastructure and agreement with geothermal operator.
•Possible pricing power - lithium hydroxide produced free of CO2 emissions in a core industrial region of Europe will benefit from a relevant premium on the reference price calculated for Asia. European battery industry will have strong incentives to use the raw material mined by Vulcan Energy Resources.
•Profitable business model – lower opex compared to traditional brine extraction – can extract in hours instead of months, not weather dependent, consistent product, no water stress (environmentally friendly)
•Vulcan’s negligible distance to market is a cost advantage as well as a carbon advantage.
•Regulatory tailwinds - 42 stakeholders from EV battery supply chain (BMW, Daimler, Renault, Volkswagen, Umicore) joined the Responsible Minerals Initiative and the World Economic Forum’s Global Battery Alliance to demonstrate their commitment to creation of a sustainable Battery Value Chain by 2030. As well as EU’s push to limit carbon emissions – other lithium mining produce 13-15x CO2/LiOH H20 (hard rock) and 5x CO2/LiOH H2O (traditional lithium brine); Vulcan – negative carbon impact.
•Unknown/misunderstood – results from scoping study likely to gain investor interest this year, specifically the magnitude -approx. 13.9 million t LCE in JORC-compliant terms (inferred mineral resource, not mineral reserve) – many websites still incorrectly list it as a copper and zinc exploration company.
•Potential for high future ROE/ROIC - Following the ramp-up phase (2022 to 2023), which will be characterised by high capex, the investment will have paid for itself within a four-year period.
•Speculating – possible future government subsidies being zero carbon footprint technology
•Strong balance sheet with no current debt and a healthy current ratio.
•However; capital raising required for stage 1 - $55M (cash on hand currently = $3M); stage 2 - $425M for Oretenau region.
•Potential is massively undervalued - according to Alster DCF valuation = Enterprise value of $769M USD ($1.3B AUD) as of March 2020; assuming dilution valued at $2.45/share.
•Long-term hold - not forecast to be profitable for 2-3 years.
•Incorrectly siting production wells and not achieving desired flow rate
•Consistency of lithium grade and potential dilution where re-injection fluids come into contact with production brine
•Possibly falling prices d/t increased market supply
“Given the strong pedigree of Vulcan’s geothermal team expertise in Germany, as well as the quality of Vulcan’s lithium experts and external geological engineering consultants, the Company is confident it can satisfactorily address the potential risks. Analyst consensus points to a lithium hydroxide supply deficit by the mid-2020s, and Vulcan’s diversified revenue stream with geothermal energy and low OPEX provides further protection against a lower price environment.”
Why I would sell:
Not hiring well - talented management essential
Management isn’t aligned with shareholders (unlikely considering how passionate Francis is as well as management ownership b/w 10-35% - not too high or low)
Pilot Plant/PFS fails
Permitting, demo plant, DFS fails
Permitting, financing construction fails
Staged commercial operation fails
Strong competitor enters EU market with similar zero carbon lithium product, similar or better operating costs and is capable of overtaking Vulcan
Lithium hydroxide demand disappears and/or price tanks (predicted undersupply in mid 2020's would have opposite effect)
Disclaimer: I own a small position in this company.
Release of shares from voluntary escrow
Vulcan Energy Resources Ltd wishes to advise, in accordance with ASX Listing Rule 3.10A, the following securities will be released from voluntary escrow today:
•300,000 fully paid ordinary shares
Ranya Alkadamani hired as non executive director.
Chairman, Gavin Rezos commented:
“We are very pleased to welcome Ranya to the VulcanZero Carbon Lithium™team. Ranya is highly regarded in the ethical and sustainable investment sector and her extensive experience as a communications strategist, working across media markets and for high profile people on matters of international importance will greatly assist Vulcanin our missionto produce and supply the electric vehicle (EV) battery market in Europe with the world’s first Zero Carbon Lithium™, and thus lower the carbon footprint of EV production.
Algester Research on Vulcan Energy Resources Ltd
"After the ramp-up phase from 2022 to 2023, which will be characterised by high capex, the investment will then pay for itself within a four-year period.
By discounting its modelled cash flow projection, Alster calculated an enterprise value for Vulcan at US$769 million — corresponding to around €700 million or A$1.3 billion.
Assuming dilution from raising additional equity as required, Alster determined a per share valuation of €1.45, or A$2.45 and provided and initial “buy” investment recommendation."
A Guardian article summarising how Vulture Energy Resources is revolutionising current lithium production processes.
"Getting an electric car from raw material to a customer’s garage produces high carbon emissions: about 150% of the fossil-fuelled equivalent. A substantial proportion of these emissions comes from the manufacture of the lithium (and nickel, manganese and cobalt-oxide) battery that gets the motor running."
"“We aim to produce a net zero-carbon lithium hydroxide product - the type used in batteries.”"
"The European lithium-ion battery market is projected to grow at a compound annual growth rate of 15.9% during 2018-24. A better environmental choice also represents sound economic investment, and car manufacturers are already on board. Volkswagen, for example, says it’s committed to the sustainable extraction of raw materials."
Disclaimer: I do not own shares in VUL.