Vulcan Energy Resources Ltd (ASX: VUL) shares are in the red today after the company announced a planned spin-off and initial public offering (IPO) of its non-core, Scandinavian assets. At the time of writing, the Vulcan share price is slumping 2.01% to $7.30. For context, the All Ordinaries Index (ASX: XAO) is sliding 0.8% in morning trade.
Let’s take a closer look at what the lithium producer announced.
What’s impacting the Vulcan share price?
The Vulcan share price is losing ground today after the company advised it has decided to spin-off and IPO its non-core, Scandinavian battery metals projects (non-lithium). This will create a new, zero-carbon copper, nickel and cobalt company named Kuniko Limited.
According to the company, by separating its non-lithium assets, the ‘new’ Vulcan can fully focus on the development of its flagship Zero Carbon Lithium project in Germany.
Kuniko will retain Vulcan’s signature zero-carbon theme throughout exploration, development and production. It will focus on zero-carbon projects, hydroelectric power, and the development of mineral processing flowsheets for production using zero fossil fuels.
Kuniko currently retains a 262 sq km portfolio that consists of five key nickel, cobalt and copper exploration projects in Norway. The company highlights its proximity to the faster-growing battery market as a key advantage. This includes key electric vehicle players such as Tesla‘s Brandenburg facility.
These three commodities have benefitted from higher prices in recent months driven by strong industrial demand in China and the electric vehicle sector. This has resulted in a surge in the value of Vulcan shares over the past year.
Nickel prices have staged a multi-year rally that began in March last year. The commodity is experiencing growing demand for use in lithium-ion batteries alongside its use in stainless steel and other alloys.
Cobalt has experienced a similar boom-to-bust cycle as lithium. The metal surged from around US$30,000/tonne in late 2016 to over US$90,000/tonne by early 2018 before falling back down to around US$30,000/tonne by July 2019. Cobalt prices have since bounced back near US$50,000/tonne due to robust demand in rechargeable batteries and energy storage.
Copper has taken off to a decade high of around US$9,400/tonne thanks to China’s significant investment in infrastructure and President Biden’s multi-trillion dollar infrastructure plan.
How will this impact Vulcan shareholders?
According to the company, Vulcan shareholders will “benefit from a 1 for 4 priority offer to raise funds at 20 cents per share in Kuniko”. Existing shareholders will also receive “priority rights to apply for additional shares above their entitlement”.
Following the spin-off and IPO, Vulcan intends to retain ownership of around 27% of Kuniko. Vulcan advised it intends to maintain the stake due to the synergies the two companies share across their focus on zero-carbon battery metals and the targeting of European markets.
The Vulcan share price has rallied by a whopping 3,370% over the past 12 months. Vulcan shares are also up by around 160% year to date. The company has a current market capitalisation of around $800 million.