Why is the Vulcan Energy (ASX:VUL) share price halted?

ASX lithium shares are surging, so why is the Vulcan share price halted?

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ASX share price trading halt represented by serious woman putting hand up

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The Vulcan Energy Resources Ltd (ASX: VUL) share price won’t be going anywhere on Friday after the company requested a trading halt.

What’s the trading halt for?

Vulcan requested the trading halt on the basis of a pending announcement regarding a binding offtake term sheet.

The Vulcan share price is expected to remain in a trading halt until Tuesday, 3 August.

A second offtake agreement on the horizon

Vulcan is nearing the end of its exploration phase, according to the company’s recent Zero Carbon Lithium project presentation.

Vulcan will be busy delivering a number of pre-construction prerequisites including a definitive feasibility study, securing offtake agreements and financing over the next few months.

It was just last week that Vulcan announced a binding lithium hydroxide offtake agreement with LG Energy Solution.

The agreement will run for a five-year term with the option to extend for another five years.

Commercial delivery is expected to begin in 2025, where LG will purchase 5,000 metric tonnes in the first year, increasing to 10,000 metric tonnes the second year and beyond.

According to Vulcan’s project timeline, construction for phase 1 of its zero-carbon lithium project should begin by the end of 2022 with a maiden lithium hydroxide production by mid-2024.

Phase 1 is expected to produce approximately 15 kilotonnes (kt) of lithium hydroxide.

Phase 2, which will begin construction around mid-2023 and reach production status in 2025 will lift the company’s production output to 40 kt.

Vulcan share price snapshot

The Vulcan share price rallied 9.74% to $9.80 in its last trading session on Thursday.

The company’s shares have ballooned in valuation, surging 253% year-to-date.

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Motley Fool contributor Kerry Sun owns shares of Vulcan Energy Resources Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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