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- Vulcan Energy (ASX:VUL) publishes a bridging engineering study for its Phase One Zero Carbon Lithium™ Project
- The company says it has reduced its CAPEX which is highly unusual in an industry where CAPEX usually goes up when engineering definition goes up
- It has also retained a low OPEX, the lowest in the industry
- Vulcan is supporting Europe in its effort to build its own domestic value chain of critical raw materials, with lithium being a top priority
- Shares last traded at $2.58
Europe’s first tonnes of domestically produced lithium came a step closer today, with project-owner Vulcan Energy Resources (ASX:VUL) publishing its bridging study.
Not only has the company identified a pathway to attractively low OPEX and CAPEX, but Vulcan says it can reduce exposure to commodity price volatility through production at the lowest cost quartile, as well as stable pricing mechanisms through binding offtakes.
Vulcan is gearing up to be the first integrated renewable energy and lithium project to supply the battery electric vehicle industry from Europe, for Europe.
Key land parcels have been acquired by the company and EPCM contractors will be named in Q1/Q2 2024.
Geothermal energy powering lithium extraction
But there’s also a renewable energy element to Vulcan’s unique lithium project.
Effectively, Vulcan utilises geothermal energy for lithium extraction, using commercially proven adsorption-type Direct Lithium Extraction technology. While some of the generated energy is used for the lithium extraction process, surplus renewable energy benefits local communities.
Not only will this contribute to Europe’s decarbonisation targets and shore up local support for the project, but it also expects to enjoy an early revenue lift from sales to households and local municipalities.
Considerable resource
The company has a global resource of 27.7 million tonnes of LCE at 175mg/l Li – the largest in Europe.
This mammoth resource, in Vulcan’s mind, locks in its ability to develop a phased growth approach that incrementally expands.
Cushioning against volatility
The company’s strategic decision to enter into long-term binding lithium hydroxide offtake agreements allows Vulcan – according to its project vision – to reduce price volatility if global lithium prices fall.
The metal has recently rebounded after a steep correction off its 2022 highs, however, remains suppressed over all-time levels.
While commodity markets are out of anyone’s control, the dynamics for domestic demand provide a positive case for Vulcan.
EU’s large lithium requirements
The European Union (EU) needs huge volumes of lithium hydroxide each year to achieve its set target of new cars to be fully electric by 2035, therefore it needs to build its own domestic lithium value chain.
Vulcan’s first phase is set to produce 24,000 tonnes of lithium hydroxide to the market, according to its bridging study.
This, it says, will be enough to pump out 500,000 electric vehicles per annum – all within Europe’s borders.
And through strategic and disciplined financial management, the company can maintain its production capacity without seeing capital expenditure rise.
In short, it seeks to consolidate two refinery plants into one, centred around one main core production well asset.
Geopolitical tailwinds
The company’s project comes at the right time as the European Commission has recently announced that a provisional agreement has been reached on the Critical Raw Materials Act, aiming to increase and diversify the EU’s critical raw materials supply chain, to support EV battery production.
And with the Chinese government curbing exports of graphite into world markets, European imports have never been more fragile. Currently, China produces more than 80 per cent of lithium hydroxide, making Europe heavily independent.
With Vulcan aiming to build a secure and sustainable lithium supply chain in Europe, the solution is right around the corner.
VUL shares last traded at $2.58.
