Vulcan Pilot Plant for DLE on Upper Rhine Valley brine now operational
Vulcan & Circulor to establish world-first full lithium traceability & CO2 measurement across supply chain
DISC: Small holding
Gina Reihnhart and John Hancock in top 20 shareholders says a lot about the confidence in this company
~ Vulcan will be collaborating with DuPont Water Solutions, a leader in water filtration and purification, to test and scale up Direct Lithium Extraction (DLE) solutions for Vulcan’s world-first Zero Carbon Lithium® extraction process.
~ DuPont will leverage its portfolio of proprietary Direct Lithium Extraction (DLE) products to assist Vulcan with input and test-work during Vulcan’s Zero Carbon Lithium® project Definitive Feasibility Study (DFS). As part of the project, DuPont will be developing and testing an integrated Direct Lithium Extraction Process for Vulcan’s brine. DuPont’s multi-technology portfolio of lithium selective sorbent, nanofiltration, reverse osmosis, ion exchange resins, ultrafiltration, and close circuit reverse osmosis will be leveraged for the study.
~Agreement is in line with Vulcan’s strategy to test and pursue commercially mature DLE products from major suppliers for its project to minimize technical risks and accelerate development of the project.
~Unlike current extraction processes, the Zero Carbon Lithium® project will demonstrate the world’s first completely carbon neutral lithium extraction process with virtually zero environmental disruption.
~DuPont Water Solutions (DWS) is a leader in sustainable water purification and separation technologies, including ultrafiltration, reverse osmosis (RO) membranes and ion exchange resins.
DISC: I hold
Acquisition to acquire minority JV partner Consolidates Upper Rhine project license holdings
Rhinehart & son here:
ref: 8/2/21, https://www.forbes.com/sites/timtreadgold/2021/02/08/gina-rinehart-and-her-son-back-novel-german-lithium-project/?sh=1f7249c6750a
VUL allegedly cost effective claim:
Vulcan’s proposed lithium production method is radically different to the evaporative ponds used in Chile and other South American countries to dry salt-rich water, or the hard-rock mining common in Western Australia, home to some of the world’s biggest lithium mines.
But what would have appealed to Rinehart and Hancock is the potential cost advantage of the Vulcan project with the company claiming that its lithium hydroxide will cost $3,142 per ton versus $6,855/t for hard rock lithium and $5872/t for evaporative brine processing
World's first zero carbon lithium process. which will produce lithium hydroxide from salt brines well;s approx 2km deep. The lithium will be used for production of batteries that will be usedin cars.Extraction will be in the rhine valley close to german car manufacturers,a by product will be renewable energy
Acquisition of a world leading German-based geothermal consultancy team
~ Binding agreement signed to acquire 100% of geothermal subsurface consultancy company GeoThermal Engineering GmbH (GeoT).
~ GeoT has a highly credentialed, world-leading scientific team with over a century of combined expertise in sub-surface development of geothermal projects, from exploration to production drilling.
~ Acquisition is part of Vulcan’s plans to accelerate its Zero Carbon Lithium® project in Germany, by rapidly growing its development team.
~ GeoT (https://www.geo-t.de/en/) is based in the Upper Rhine Valley, Germany, and is owned by Vulcan Executive Director Dr. Horst Kreuter.
Beneficiary of macro trends going forward seems to be a no brainer, time to scale in at low $7 range with the anticipation to buy more if it falls lower.
VUL as expected got a speeding ticket and they didnt waste the response, outlining many of the recent catalysts. To be fair, many of these have had a broad role in the EV/Battery/Battery Metals pump thats happening right now too. Paraphrasing:
Positive Pre-Feasibility Study 15/1/21
Shares looking to rise 34+% at open
Battery stocks are rallying at the moment and look to be the flavour of 2021. Lithium is a big part of the story and it looks like there is already a little more support coming into prices.
At the same time, the auto industry is starting to push emissions reductions down into the supply chain.
Ergo, companies that can support that will have the long tailwinds of both sustainability and electrification of the car industry.
VUL has a lot of excitement for its narritive. Pulling lithium from a geothermal brine and using the heat to generate electricity. It is potentially the biggest lithium source in Europe and most importantly it would be carbon emissions negative. Smack bang in the middle of Europe (Germany), its location is great too.
The PFS is due shortly which is why the pump is on right now. Im not sure if it will surprise either positively or negatively.
There are two stages to the project. Stage one is much smaller and would aim to use an existing geothermal plant. stage two would involve new wells and geothermal plants.
On the positive side, stage one is low risk and alone (subject to the PFS) estimates are for net profits from the operation in the region of $35M pa. Current MC is $355 and you can see that its probably still reasonably valued.
Stage two with an extra 10 wells could add an extra ~$500M net profit per annum. That gives plenty of upside to come (though financing of capex will be a big question too).
The big risk with those are NIMBY with some concern about earthquakes being caused by geothermal activity in the area.
At the same time, the German government is pushing geothermal energy to help its emissions reduction drive.
Hoepfully the PFS will answer a lot of questions and concerns!
$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.
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.
•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.
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.