Here's why this ASX 300 lithium stock was halted today

The batteries were pulled out of this company's share price today.

Mitchell Lawler

Mitchell stumbled upon the concept of investing when in high school, devotedly urging his parents to put some money into a handful of technology companies with increasingly popular products among his demographic – many of which have gone on to great success. It wouldn’t be until 2017, some five years later, that Mitchell became an investor of his own money. Having studied and worked as a mechanical engineer in the building services industry, Mitchell takes a methodical and analytical approach to evaluating businesses. Rather than relying purely on numbers, Mitchell drills beyond a company’s metaphorical mantle to unearth obscure patterns or competitive advantages that would go otherwise unnoticed. His expertise resides within areas such as software, consumer goods, and building services equipment. However, his quest to find quality companies that set the industry standard and flex some degree of an impenetrable position has no limits – small cap to mega cap, cosmetics to healthcare – if it’s an exceptional business it’s on his radar.

Published December 11, 2024 4:57 pm AEDT

One ASX lithium stock refused to budge while the S&P/ASX 300 Index (ASX: XKO) limped lower today.

Australian shares largely followed the mediocre example set by US markets last night. However, shares in Vulcan Energy Resources Ltd (ASX: VUL) didn't move an inch today as the lithium project developer put itself in a trading halt before the opening bell.

The $1.25 billion company's cash balance had been dwindling since its last capital raise in early 2023 and strategic investments from CIMIC Group and Hancock Prospecting, which occurred in June this year.

At the end of FY2024, Vulcan only held the equivalent of A$100 million worth of cash on its balance sheet. For context, the company's operating expenses for the last financial year came in at around A$64 million, implying roughly one and a half years' worth of remaining cash runway.

a woman wearing a dark business suit holds her hand up in a stop gesture while sitting at a desk. She has a sombre look on her face. — Image source: Getty Images

Scooping up $184 million in cash

As per the update, Vulcan Energy is replenishing its coffers to the tune of A$184 million through three placements:

€74 million (A$121 million) via a fully underwritten institutional placement
€26 million (A$43 million) via non-underwritten placement for 'strategic investors'
€12.2 million (A$20 million) via a share purchase plan

Vulcan stated its cash reserves ahead of the placement sat at €20 million (A$33 million). The additional capital is said to be earmarked to 'fund the commencement of project execution of the Company's Phase One Lionheart Project'.

Specifically, the funding will go towards the field development plan; engineering, procurement, and construction contracts, and other 'critical path execution capital and operating expenditures'.

The shares offered in the placements are priced at $5.85 apiece, almost 12% below the last trading price of the ASX 300 lithium stock. Meanwhile, any shareholders on the register as of 7pm yesterday will have the option of partaking in the share purchase plan up to an additional A$30,000 worth of Vulcan shares.

How this ASX 300 lithium stock has remained unscathed

Despite much of the ASX lithium sector being torn to shreds this year, Vulcan Energy has managed to avoid the punishment. Better still, shares in the company are up a gargantuan 136% to date in 2024.

How can this be the case when the price of lithium has simultaneously languished? That's where it's important to zoom out.

As the chart above shows, this ASX 300 lithium stock has experienced its fair share of brutality. The only difference is Vulcan tussled with the big red candles long before most. By the end of 2023, shares in the company had dropped 82% from their 2021 high.

However, the tides appear to be turning as the developer makes progress towards securing the funding needed to get its first project off the ground. For example, earlier this week, Vulcan received conditional approval of A$196 million from Export Finance Australia.

Now, we'll have to wait and see how successful these three placements pan out to be.

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