Why Vulcan (ASX:VUL) could be a lithium share with 120% upside

Is Vulcan a lithium share to buy? This broker thinks it is…

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The Vulcan Energy Resources Ltd (ASX: VUL) share price could be great value according to one leading broker.

This is despite the lithium developer’s shares rising 250% since the start of 2021.

Who is bullish on the Vulcan share price?

The team at Canaccord Genuity is very bullish on the Vulcan share price. In fact, it believes it could more than double in value in 2022.

According to a note from last week, the broker has retained its speculative buy rating and lifted its price target on the company’s shares to $22.00. Based on the current Vulcan share price of $9.86, this implies potential upside of 120% over the next 12 months.

This price target is based on its “risked (60%) NAV, using US$15,000/t LiOH, 1.58 EURAUD, and 8% discount rate for the lithium operation.”

What did the broker say?

Canaccord Genuity notes that Vulcan has agreed to acquire the Insheim geothermal plant and secured offtake rights for spent brine from the Landau geothermal plant.

It sees a lot of positives in this and notes that it means Vulcan will soon be generating revenue. It also gives it an opportunity to demonstrate its direct lithium extraction (DLE) technology.

The broker said: “In mid-December, Vulcan agreed to acquire the Insheim geothermal plant and secured offtake rights for spent brine from the Landau geothermal plant. The acquisition, which was effective 1 Jan 2022, transitions Vulcan into an operator with revenues.”

“However, more importantly, it is a platform for Vulcan to demonstrate its DLE technology in a commercial operation and how geothermal reservoirs operate (Li grades, flow rates, subsurface conditions). We previously unwound some of our risking to account for the potential acquisition, but we have now modeled the operation assuming €330m to upgrade the assets, construct the DLE, and contribution to the first stage of the Central Lithium Plant (CLP),” it added.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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