Lithium

Vulcan Energy granted new exploration licenses as lithium stocks break out

Tue 04 Jan 22, 1:05pm (AEST)
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Key Points

  • New licences increase Zero Carbon Lithium Project area by almost 50%
  • New area is 'prospective' in nature, requires additional exploration follow-up

Vulcan Energy Resources (ASX: VUL) has been granted five new exploration licenses for geothermal energy and lithium brine operations in the Upper Rhine Valley, Germany. 

The licenses cover 325km2 of area, which Vulcan considers to be prospective for deep geothermal and lithium brine. This will grow the company’s granted license area by almost 50% to over 1,000km2

2022-01-04 12 46 04-2022-01-04 12 05 24-Microsoft Word - Grant of licenses significantly grows Zero

Commenting on the new licenses, Vulcan’s Managing Director Dr Francis Wedin said: 

“The new exploration licenses are consistent with our strategy to leverage the unique experience of our inhouse team, notably the geological expertise of our in-house geothermal engineering and geology company GeoT, to identify areas which have potential for combined geothermal renewable energy and lithium developments in the Upper Rhine Valley.” 

Definitive Feasibility Study on the horizon

Vulcan is targeting the completion of its Phase 1 Definitive Feasibility Study (DFS) in the second half of 2022. This will cover the first five to six years of planned operations. 

Phase 1 includes the construction of two geothermal plants to generate 22 mega watts of electricity and a central lithium plant to produce 15,000t of lithium hydroxide.

At face value, the new exploration licenses is great news, providing a runway for additional scale for Vulcan's Zero Carbon Lithium project. 

That said, the granted license area is deemed ‘prospective’ for geothermal and lithium resources. Further exploration activities will be required to determine its actual resources.

Given its prospective nature, the new areas are unlikely to be within the scope of its Phase 1 DFS.

A breakout day for lithium stocks 

Vulcan shares are up 5.0% in an immensely bullish day for lithium stocks. 

Large cap Pilbara Minerals (ASX: PLS) and Allkem (ASX: AKE) are up 8.1% and 7.1% respectively, both rallying to fresh all-time highs. 

Emerging players like Core Lithium (ASX: CXO), Liontown Resources (ASX: LTR) and Lake Resources (ASX: LKE) are up between 5.1% and 8.4%.

Vulcan lags

Vulcan shares have underperformed its lithium peers as of late, weighed by a short attack from J Capital on 29 October.

VUL 2022-01-04 12-28-32

 

On 15 December 2021, Vulcan received a settlement and an apology in its proceedings against J Capital.

Despite Vulcan's recent underperformance, Canaccord Genuity remains bullish on the stock with a speculative buy rating and $21.00 target price.

The broker viewed its $31.5m euro acquisition of the Insheim Geothermal Plant as a significant derisking event to accelerate its renewable electricity business.

"We had previously forecasted first production in 2025, reaching its full 40ktpa production rate in 2028 and this now may prove to be conservative. Vulcan has signed offtake agreements which if delivered at the top end of estimates would exceed 40ktpa," said Canaccord in its note.

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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