This morning the Vulcan Energy Resources Ltd (ASX: VUL) share price went bananas, flying up 44%. This set a new all-time high of $7.20 for the company’s share price.
Since then, the Vulcan share price has settled back down and is now trading 35% higher for the day at $6.74.
So why the feeding frenzy on Vulcan shares this morning?
Initial pre-feasibility study, tick
Vulcan shares commenced trading this morning after being in a trading halt since 11 January. The lithium miner requested the halt to prepare for the announcement of its pre-feasibility study (PFS) for its Zero Carbon Lithium project.
The results are in, and Vulcan likes the looks of them. Vulcan managing director, Dr Francis Wedin, commented:
We are very pleased to reach this major milestone for investors in Vulcan and the Zero Carbon Lithium® Project. The PFS has demonstrated robust economics for both the lithium and energy parts of the project, both independently and combined.
This means that there doesn’t need to be a compromise on the ethical and environmental sourcing of battery raw materials, for Europe’s current rapid transition to electric vehicles and renewable energy storage.
What are the details?
The full PFS is 91 pages long and covers at detail plant design parameters, project economics, market studies, etc. So, if you want to brush up on all the details, I suggest grabbing a tea, or coffee, and getting comfortable. Otherwise, here are some of the main points:
- The first PFS indicates the strong potential to develop the combined direct lithium extraction (DLE) and geothermal project, in the centre of Europe, with net-zero carbon footprint
- Positive post-tax net present value (NPV) of EU$2.25 billion (full project, no phasing); Phase 1 option indicates EU$700 million NPV; and Phase 2 option indicates EU$1.4 billion NPV
- The internal rate of return (IRR) post-tax for the combined project is 21%. Lithium separately is expected to be 26% IRR post-tax.
- Robust project economics assisted by the previously announced favourable feed-in tariff rates as a result of an Act amendment by the German government.
- Probable ore reserve of 1.12 megatonnes of lithium carbonate equivalent at 181 mg/l across Ortenau and Taro licenses.
- Anticipated 74 MW of renewable energy generation.
Interestingly, on slide 19 of the corporate presentation, by Vulcan’s estimation, its brine conversion process will be nearly half the cost of competitor’s LiOH brine processing. For quick reference, on the top end, Vulcan expects the cost to be $3,142 per tonne of LiOH, compared to the existing competitor’s $5,872 per tonne of LiOH.
What’s next for the Vulcan share price?
Based on Vulcan’s project timeline, the company will carry out piloting test work, as well as conducting the definitive feasibility study (DFS), permitting, and undergoing further discussions with European lithium offtakers.
As per Vulcan’s own accounts, the company likely won’t start production until 2024 at the earliest. In between now and then, there will still be a lot of leg work to hit all the necessary milestones.
With today’s latest run, the Vulcan share price is now up more than 4110% in the last 12 months.
The last 2 months has seen the share take off from just under $2.00, to the $6.74 price tag it holds today. The company’s market capitalisation now presides at $393.88 million.
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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