Vulcan share price rockets 25% on Stellantis deal

This lithium share is rocketing higher on Friday. Here’s why…

| More on:
Man with rocket wings which have flames coming out of them.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Vulcan shares are rocketing higher on Friday morning
  • This follows news that the lithium developer has received a major investment from a top tier automaker
  • Stellantis is investing $76 million into Vulcan at a material premium to its last close price

The Vulcan Energy Resources Ltd (ASX: VUL) share price has flown out of the gates on Friday morning.

At the time of writing, the lithium developer’s shares are up 25% to $6.21.

Why the Vulcan share price rocketing higher?

Investors have been fighting to get hold of the company’s shares this morning after it announced a major investment from a top tier automaker.

According to the release, Stellantis, the company behind car brands including Chrysler, Citroën, Fiat, Maserati, and Peugeot, has invested A$76 million into Vulcan.

While this news is positive enough, it gets better. Stellantis is paying over the odds to become Vulcan’s second largest shareholder. The two parties agreed a price of $6.622 per share, which represents a 32% premium to the Vulcan share price at yesterday’s close.

In addition, Stellantis has extended its binding lithium hydroxide offtake agreement by five years to 2035. Starting in 2026, the automaker will be purchasing a minimum of 81,000 tonnes and a maximum of 99,000 tonnes of battery grade lithium hydroxide over a duration of 10 years.

The release reveals that the proceeds from this investment will go towards Vulcan’s planned production expansion drilling in its Upper Rhine Valley Brine Field (URVBF).

‘A strong statement’

Vulcan’s Managing Director, Dr Francis Wedin, believes this is a “strong statement” regarding the sourcing of sustainable battery materials. He commented:

Stellantis’ significant investment in Vulcan and the Zero Carbon Lithium Project represents a strong statement by one of the world’s largest automakers regarding sustainable and strategic sourcing of battery materials.

We are fully aligned with Stellantis’ decarbonisation and electrification goals, which represent some of the most ambitious in the industry. It is encouraging to see a leading automaker investing in local, decarbonised lithium production for electric vehicles. As our largest offtaker, we look forward to deepening our relationship with Stellantis as a substantial shareholder in Vulcan and our Zero Carbon Lithium business.

Stellantis’ CEO, Carlos Tavares, added:

Making this highly strategic investment in a leading lithium company will help us create a resilient and sustainable value chain for our European electric vehicle battery production. We continue our quest of forming strong relationships with partners who share our values as we collectively fight against global warming and provide clean, safe and affordable mobility to our customers.

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 Scott Phillips.

More on Materials Shares

a man wearing a hard hat and a high visibility vest stands with his arms crossed in front of heavy equipment at a mine site.
Materials Shares

Why did the Lynas Rare Earths share price tumble in June?

We check how the rare earths producer fared last month.

Read more »

Woman in yellow hard hat and gloves puts both thumbs down
Materials Shares

South32 share price heads 8% south on high volumes, but why?

South32's shares are heading south today. But why?

Read more »

Broker looking at the share price on his laptop.
Broker Notes

Broker upgrade fails to stop the OZ Minerals share price from falling today

The copper price has dived on fears of a looming global recession.

Read more »

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Materials Shares

Why did the Sayona Mining share price crash 32% in June?

Last month was a tough one for this ASX lithium developer.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Materials Shares

Can ASX lithium share Pilbara recover in July after slumping 22% in June?

One broker is predicting 90% upside for the lithium producer.

Read more »

a woman wearing a sparkly strapless dress leans on a neat stack of six gold bars as she smiles and looks to the side as though she is very happy and protective of her stash. She also has gold fingernails and gold glitter pieces affixed to her cheeks.
Gold

Here’s why the St Barbara share price shone 8% brighter today

What's going on with the gold miner on Tuesday?

Read more »

A person wears a roaring lion mask.
Materials Shares

Own Liontown shares? Here are 3 takeaways from the company’s investor presentation

What did today's presentation reveal?

Read more »

A mining worker wearing a white hardhat stands on a platform overlooking a huge mine as ASX 200 mining shares fall over the month of June
Materials Shares

Down 25% in a month, what is the outlook for the Allkem share price in July?

Could the lithium company's share price turn around in July?

Read more »