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Vulcan Energy Resources


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Investment Memo: Vulcan Energy Resources (ASX:VUL) - LIVE

Opened: 21-Dec-2021

Shares Held at Open: 563,000

What does VUL do?

Vulcan Energy Resources (ASX:VUL, FWB:6KO) is aiming to become the world’s first Zero Carbon LithiumTM producer.

VUL plans to produce battery-grade lithium hydroxide from geothermal brines pumped from wells with a renewable geothermal energy by-product.

VUL will sell its lithium product to car manufacturers looking to make Electric Vehicles (EVs) in Europe and electricity and heat energy into local markets.

What is the macro theme?

The rechargeable batteries that power EVs require lithium. And with increasing focus on decarbonisation of EV supply chains, companies that can supply the raw materials for these vehicles with low or zero carbon emissions should thrive. This has appeal for governments, ESG Funds, manufacturers and end users alike.

Why did we invest in VUL?

Excellent execution

VUL has performed extremely well and the management has been excellent in execution. They have delivered every promise since we invested two years ago.

Lots of cash in the bank

VUL raised over $320M in 2021 so we are holding to see how they will deploy this new capital.

Valuable technical skill set

Sustainable lithium from brines and geothermal is growing in popularity globally. VUL has assembled one of the best technical teams with this rare skill set, putting VUL in a strong position to grow through acquisition of geothermal\brine projects.

De-risked capital

Large pools of capital earmarked for Environmental, Social & Governance (ESG) investments need to find a home, meaning that VUL should face fewer hurdles in securing financing.

What do we expect VUL to deliver?

Objective #1: Complete Phase 1 Definitive Feasibility Study (DFS)

The major milestone of the upcoming year is completing the Phase 1 Definitive Feasibility Study (DFS), also called a Bankable Feasibility Study (BFS), which will provide further clarity on the project’s economics and development feasibility. DFS completion is expected in the second half of 2022.

Objective #2: Secure Project Financing

Having raised $320M via two Placements in 2021, VUL is financed through to completion of its DFS, but further financing will need to be secured to fund project construction.

Objective #3: Expansion of scope

VUL has already signed offtakes for all of its planned Zero Carbon LithiumTM production. We want to see the company expand its scope for future lithium production by acquiring more land holdings and more projects to help meet anticipated rising demand.

Objective #4: Heat offtake agreements

VUL is looking to sign offtake agreements in order to sell renewable heat generated from its geothermal brines into the local market.

Objective #5: More strategic partnerships (to demonstrate execution)

While VUL has already locked away much of its first five years of lithium production, it continues to develop strategic partnerships across all three of its businesses.

What could go wrong?

Development risk

The project economics are hurt by a declining lithium price or cost blow outs in the project construction. Alternatively, the flow rates from the lithium project (how much lithium comes out of their project’s wells) are slower than adequate, in turn hurting the project economics.

Market risk

It's possible the oil price takes a sharp dip on a major global economic slowdown, slowing the uptake of EV vehicles in Europe.

Financing risk

We think the DFS is going to be VUL’s calling card for financing the project, but things may change. For example, the full project currently calls for expenditure of €1.78B ($2.81B) as of the Pre-Feasibility Study (PFS). Should development risks and market risks play out this could negatively impact the level of financing. Put simply, VUL is operating in an early-stage market that could change rapidly.

Stakeholder risk

VUL needs a social licence to operate. Local landowners, business owners and community members may oppose the project’s development, either slowing down the development or preventing it altogether.

What is our investment plan?

VUL has already been a very successful investment for us since we invested at 20c in August 2019 - we have free carried, taken profit and still hold 563,000 shares.

Our plan is to continue to hold a position during 2022 and beyond. We will likely sell another 20% of our holding during the year, hopefully if the share price re-rates on the back of any significant news.

Disclosure: The authors of this memo and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 563,000 VUL shares at the time of writing this investment memo. S3 Consortium Pty Ltd has been engaged by VUL to share our commentary on the progress of our investment in VUL over time.

Investment Milestones for VUL

✅ Initial Investment: @ 20c
Top Slice
Free Carry
✅ Increase Investment: @ 40c
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✅ Increase Investment: @ $6.50
Free Carry
Take Profit
Price increases 300% from initial entry
Price increases 500% from initial entry
Price increases 1000% from initial entry
Price increases 2000+% from initial entry
12 Month Capital Gain Discount
🔲 Hold remaining Position for next 2+ years

Our Past Commentary on Vulcan Energy Resources

Date Title
21-Feb-2022 $ 8.950 Why we invest in Oil & Gas and Precious Metals
05-Feb-2022 $ 9.000 The "Lesser Kown" Energy Transition Metals: Copper, Aluminium, Graphite, Helium, Rare Earths
22-Jan-2022 $ 9.240 Our Investment Approach, Energy Cold War, Ukraine, Supply Chain Crisis
14-Jan-2022 $ 10.310 How do Fund Managers Invest in Small Cap Stocks?
08-Jan-2022 $ 10.000 Early-year trading indicates market is set for an up-and-down year
21-Dec-2021 $ VUL continues to execute as sustainable lithium demand surges. So what’s next?
11-Dec-2021 $ 11.700 ASX rests pre-Christmas as the market trades on very low volumes
27-Nov-2021 $ 10.750 New COVID strain, Santa Rally, Market Thoughts
20-Nov-2021 $ 10.210 Australia bets big on Hydrogen at COP26, investment in companies that solve problems
06-Nov-2021 $ 12.950 COP26, Battery Metals, Green Energy
01-Nov-2021 $ VUL Withstands Short Seller Attack
30-Oct-2021 $ 12.080 The fallout from the VUL short attack explained
29-Oct-2021 $ VUL Short Squeeze - Here’s Why
25-Oct-2021 $ 13.600 Lockdown lifts, Two stocks to watch: MNB and ONE
18-Oct-2021 $ VUL signs third major offtake in 90 days
16-Oct-2021 $ 12.790 Mainstream media casts a big spotlight on Green Hydrogen
09-Oct-2021 $ 11.650 Investing 101: Key lessons for small cap investors
02-Oct-2021 $ 13.150 Evergrand, Gold and Traditional Energy
29-Sep-2021 $ Lithium price keeps rising as VUL locks in lithium production plant site
27-Sep-2021 $ 13.590 VUL Produces First Battery-Grade Lithium Sample
25-Sep-2021 $ 13.590 Managing a market crash - lessons from March 2020
20-Sep-2021 $ 14.600 ONE, VUL all grown up… BPM, LCL finding targets. PUR drilling again.
18-Sep-2021 $ 14.600 Why uranium stocks are soaring, one good movie recommendation
17-Sep-2021 $ Cashed up VUL Expands its Zero Carbon Lithium Ambitions
04-Sep-2021 $ 14.100 Annual Reports, Uranium and a Welcome to New Subscribers
28-Aug-2021 $ 13.480 Recap of the KNI IPO and share price run
23-Aug-2021 $ 12.150 VUL appoints project finance advisor BNP Paribas. Alster upgrades VUL price target (again) to $19.50
21-Aug-2021 $ 12.150 Market fluctuations and portfolio news and quick takes
14-Aug-2021 $ 13.750 Bookmark it, a new Pick of the Year is coming next week
09-Aug-2021 $ 13.890 VUL Now Entering The Big Leagues
07-Aug-2021 $ 13.890 Market swings back up as small caps scramble towards the end of the year
02-Aug-2021 $ VUL secures a potential US$1B Lithium deal with leading EV carmaker
02-Aug-2021 $ 10.150 VUL Signs ANOTHER Lithium offtake - this time worth up to US$255M per year
24-Jul-2021 $ 9.160 Why stocks go into "Quiet Execution Mode", how to spot a cap raise, stock "Confession Season"
20-Jul-2021 $ VUL’s US $150M per year Lithium Offtake Deal
19-Jul-2021 $ 10.080 VUL signs ~$150M per year offtake with world’s biggest EV battery Maker LG
17-Jul-2021 $ 10.080 Cash is King, Gold Stocks and Enough of VUL and EMN
16-Jul-2021 $ 9.400 VUL and EMN: Key takeaways out of Europe this week
13-Jul-2021 $ 8.850 Two more key events coming out of Europe in the next 48 hours...
10-Jul-2021 $ 8.200 Breaking News: Stellantis signs offtake MoU with VUL
09-Jul-2021 $ 8.200 Stellantis EV Day: Mystery European Geothermal Lithium MoU & Manganese to be used in all batteries
08-Jul-2021 $ 8.130 Move over Musk. Yet Another Auto giant to reveal Electric strategy tonight at 11:30pm AEST
05-Jul-2021 $ 8.000 World First: Lithium from geothermal brine offtake deal signed in the USA
26-Jun-2021 $ 7.950 June tax loss selling is behind us, KNI IPO expected in August
19-Jun-2021 $ 7.980 What is Tax Loss Selling?
16-Jun-2021 $ 8.360 Last night VW announced it wants to secure battery metals directly from miners...
12-Jun-2021 $ 8.850 What did our investments do this week? CPH, ONE, TMZ, 88E and more...
29-May-2021 $ 7.820 Green Hydrogen in the news, Investment Milestones released, stock portfolio news
27-May-2021 $ 7.310 VUL ASX Achieves Target 90% Lithium Extraction while Billionaires Buying on Market
27-Apr-2021 $ 7.900 Our Portfolio Performance from January 1st to March 31st 2021
15-Apr-2021 $ 7.020 New $15 Analyst Price Target Gives VUL a Nudge
09-Apr-2021 $ 6.450 And our Next Investment is… Going to be Announced in the Coming Weeks
23-Mar-2021 $ 6.480 TRIPLE DOWN ALERT - Plus 6 Hot Stocks
16-Mar-2021 $ 6.710 Power Day Launches Volkswagen’s EU Electric Vehicle Future
02-Mar-2021 $ ASX Stock to Ride the Great Electric Vehicle Rush
02-Mar-2021 $ Vulcan on Track to Deliver World First Zero Carbon Lithium
25-Feb-2021 $ 6.450 This ASX Stock is Now Cheaper than Where We Last Invested
18-Feb-2021 $ 7.240 We Just Invested More in this Stock ... ... plus what's happening with VUL and EXR?
12-Feb-2021 $ 7.500 What are the best returns in our portfolio?
04-Feb-2021 $ 8.500 Vulcan ASX Bags $120M Bucks from Big Name Backers and Banking Behemoth
25-Jan-2021 $ 8.100 Vulcan ASX has Evolved into a Tesla Like Share Price Story
16-Jan-2021 $ 6.980 Vulcan ASX Reveal A$3.5BN Net Present Value on Zero Carbon Lithium Project
15-Jan-2021 $ 6.980 Our Key Takeaways from VUL’s PFS - What will the VUL share price do next?
12-Jan-2021 $ 6.980 What we are Watching Over the Next 48 Hours
07-Jan-2021 $ 3.550 Our Stock Picks for 2021
11-Dec-2020 $ 2.460 EU Climate Policy - Battery Materials Supply Regulations Leaked?
09-Dec-2020 $ 2.290 Why are We Staying Up to 3am Tonight?
23-Nov-2020 $ Vulcan's Resources Could Satisfy the EU's EV Needs
12-Nov-2020 $ 1.445 Vulcan ASX Boosts Confidence in Lithium Resource Ahead of PFS
06-Nov-2020 $ 1.050 Is Vulcan ASX Presenting a Buying Opportunity?
24-Sep-2020 $ 0.880 Tesla Unveils Strategic Battery Plans: What This Means for Our Pick of the Year
03-Aug-2020 $ 0.455 Vul ASX Hits Milestone: Reports 90%+ Lithium Recoveries from Geothermal Brines
11-Jul-2020 $ 0.540 Our Top Pick Up 100% Since Our May Update (Vul ASX) – Now with Institutional Backers
01-Jun-2020 $ World's First Zero Carbon Lithium Project
29-May-2020 $ 0.285 Momentum Building in Vul ASX - Our Top Pick of 2020
16-Mar-2020 $ 0.200 Vul ASX “Our First Ten-Bagger” say German Research House
21-Feb-2020 $ 0.245 REVEALED: Our Top Stock Pick for 2020 (Vulcan Energy ASX)
20-Jan-2020 $ 0.175 Vulcan Increases Europe’s Largest Lithium Resource
05-Dec-2019 $ 0.185 A New Number One – Vulcan Energy ASX Now Hold the Largest Lithium Resource in Europe
22-Nov-2019 $ 0.120 Can Vulcan’s Zero Carbon Lithium™ Deliver Emission-Free Cars?
20-Aug-2019 $ 0.185 Vulcan Energy ASX Delivering the World’s First “Zero Carbon” Lithium Project

Successful in-house lithium extraction tech developed


Nov 14, 2022


Investment Memo: VUL IM-2022
Investment Thesis 3 : Valuable technical skill set
Risk 1 : Development risk

Our lithium development Investment and 2020 Pick of the Year Vulcan Energy Resources (ASX: VUL) has successfully developed, tested and demonstrated its own in-house lithium extraction sorbent, VULSORB™ to sustainably extract lithium from the Upper Rhine Valley Brine Field and its Zero Carbon Lithium™ Project.

Test-work using VULSORB™ on live brine, from VUL’s commercially operating geothermal plant, demonstrated higher performance and lower water consumption compared with commercially available sorbents that VUL has tested.

It allows for very pure lithium chloride to be selectively extracted from the brine that can then be converted to lithium hydroxide for use in lithium-ion batteries.

VULSORB™ is a variation of the type of lithium extraction sorbents developed thirty years ago and used globally to commercially extract lithium from brine for decades.

But VUL’s process is much faster and more efficient than the legacy industry method — it has a lower carbon footprint and sorbent extraction takes just hours, rather than up to 18 months.

This development now positions VUL as a lithium extraction technology provider, as well as a lithium chemicals and renewable energy developer.

We see potential for VUL to licence out the tech to other lithium brine companies — a potential additional revenue stream for VUL. This lithium extraction approach can be used in most lithium-rich brines globally, if they have sufficient salinity and there is enough heat to drive the process.

VUL continues to test other sorbents for lithium extraction from commercial suppliers, but at this stage VULSORB™ is its first choice in its planned Phase 1 commercial development, targeting first commercial lithium production for Q4 2025.

The production of this in-house lithium extraction sorbent — along with recent test results of the highest grade, lowest impurity lithium hydroxide to date from VUL’s pilot plant — are positive signs as we look ahead to the completion of VUL’s DFS and then first commercial Zero Carbon Lithium™ production that is anticipated in late 2025.

Completion of the DFS was the main objective that we want to see VUL achieve. While previously expected in the second half of 2022, VUL says the DFS will be completed in the first quarter of 2023.

Vulcan to expand into France


Nov 02, 2022


Investment Memo: VUL IM-2022
Objective 3 : Expansion of scope

Our lithium Investment and 2020 Pick of the Year, Vulcan Energy Resources (ASX:VUL) is set to expand its business into France, a move which is being supported by significant shareholder and multinational carmaker, Stellantis.

We like this move, as it could significantly increase VUL’s footprint in the European battery metals market and allow for larger scale production down the track should all go well.

As part of the push into France, VUL has applied for its first lithium exploration licence in the Alsace region of France which can be seen below:

Previously, VUL’s brine sampling work in Alsace returned a high grade of 214 mg/L lithium with low impurities.

Importantly, “existing geothermal operations in the region indicate brine composition in Alsace is materially the same as the brine composition across the border at Vulcan’s operations in Germany, meaning Vulcan’s sustainable lithium production process is applicable across the whole field.

This is significant as VUL recently reported that its brine graded 57.1% lithium hydroxide (LiOH), easily exceeding the best-on-the-market battery grade specification of 56.5% LiOH that is required from offtake customers.

What’s next for VUL? We are now looking towards Phase 1 of the Definitive Feasibility Study (DFS), which VUL expects in the first quarter of 2023.

Highest grade lithium produced to date


Oct 25, 2022


Investment Memo: VUL IM-2022
Objective 1 : Complete Phase 1 Definitive Feasibility Study (DFS)

The chemical engineering team of Vulcan Energy Resources (ASX:VUL) has just produced the highest grade, lowest impurity lithium hydroxide to date from its pilot plant.

VUL’s lithium hydroxide pilot plant is located at the commercially operational geothermal renewable energy plant at its Zero Carbon Lithium™ Project in Germany.

In our view, these are solid results — this latest material produced graded 57.1% LiOH, easily exceeding the best-on-the-market battery grade specification of 56.5% LiOH required from offtake customers.

We also note that impurities were well below market specification minimums.

It is the embodied renewable heat within VUL’s brine that allows for it to use the commercially proven sorption method of lithium extraction which produces a very high purity lithium chloride (LiCl) product. This, in turn, enables the use of lithium electrolysis to directly produce very high grade, low impurity lithium hydroxide (LiOH).

The pilot plant has now been successfully operating since April 2021, and it has now produced sufficient data to complete Phase 1 of the Definitive Feasibility Study (DFS), which VUL expects in the first quarter of 2023.

Having been early investors in VUL, holding for over three years now, we are keenly awaiting release of the DFS — it is the key objective that we want to see the company achieve as it will provide further clarity on the project’s economics and development feasibility.

Canaccord Genuity released a note after the announcement. The broker has a speculative buy recommendation and $19 price target on VUL (as compared to the current $6.67 share price). It made note of the product’s low levels of impurities, which it says highlights one of the strengths of using a geothermal DLE process in the production of lithium.

Of course analyst predictions cannot be relied upon alone, they are based on a number of assumptions that may not happen. Always seek professional financial advice and make your own investment decisions.

McKinsey on Battery Materials Demand

Oct 21, 2022

Macro: Lithium

There’s a really interesting article here from McKinsey on the huge demand EVs will create AND how the battery materials supply chain can meet this demand.

Key takeaways:

  • Lithium and nickel - “the battery industry’s demand for lithium is expected to grow at an annual compound growth rate of 25 percent from 2020 to 2030, while demand for nickel could multiply as battery demand shifts to nickel-rich products”
  • Asia making the batteries and Europe buying - “70 percent of the key equipment suppliers, for both coating and general cell assembly equipment, are based in Asia…companies in North America and Europe may need to consider developing strong international sourcing relationships.”
  • Geopolitics a major factor - lithium is widely abundant, but ~70 percent of current global production is in Australia and Chile, meanwhile the majority of global cobalt production is in the Democratic Republic of the Congo - which has faced criticism over its mining practices

There’s a great chart here too, which shows the demand growth from EVs and the geography and battery chemistry breakdown:

We’re Invested in a broad spectrum of battery materials companies as part of a decade long investment thesis.

To find out what what battery materials companies we hold in our Portfolio click the button below:

Lithium supply shortage to continue

Sep 26, 2022

Macro: Lithium

The lithium supply shortage is set to continue for at least the rest of this decade and into the 2030s, says a key adviser to the London Metals Exchange and LME lithium committee inaugural chairman Ron Mitchell.

As reported in the AFR this morning, Mitchell said that for lithium production to come anywhere near meeting upcoming demand, a lot of new mines would be needed and that “a lot is going to have to go right if we’re going to get the tonnes we need in the market”.

The increasing demand from European car makers has driven a steep rise in prices for the key battery ingredient since 2020.

Yet the market still has a lack of price transparency, which was largely behind the reason that the LME joined forces with reporting agency Fastmarkets in mid-2021 to launch a futures contract for lithium hydroxide.

But even with this lithium futures contract, it remains hard to compare lithium to other commodities. Because it is a nuanced specialty chemical, every lithium product is different, making it difficult to trade off a futures index and apply discounts or premiums based on quality.

Mitchell also highlighted the challenges around the shelf-life of the material that make it hard for physical trading as well, explaining that “you can’t just store it in a shed and leave it there for two or three months and then as the price increases bring it to market. There’s risk in doing that.”

Mitchell also commented on the trend of car makers taking equity positions in lithium producers and explorers, such as Toyota with Allkem, Ford with Liontown and Great Wall with Pilbara Minerals. We’d add Vulcan Energy Resources (ASX: VUL) to that list which last year received a A$76M (€50M) equity investment from Stellantis N.V.

Looking ahead, Mitchell expects that trend to continue and it to also extend to producers and explorers of other battery minerals


Critical minerals quickly becoming a priority in the EU

Sep 20, 2022

Macro: Commodities

Readers who follow our Investment Portfolios will know that we have been making strategic Investments in commodities that have made critical minerals lists for the EU, USA, Japan, India and Australia.

These minerals are considered critical to the digitisation and decarbonisation macro thematic and include lithium, graphite, cobalt, nickel and PGE’s, to name a few.

Over the weekend, the following speech from the president of the European Commission, Ursula von der Leyen, gave a speech announcing that the EU would look to pass a “European Critical Minerals Act”.

The aim is to avoid the position Europe finds itself in with oil and gas, where it relies on a single trading partner like Russia.

The act would see the EU put in place:

  1. Agreements with partners like Chile, New Zealand, Mexico, India and Australia for the supply of critical minerals.
  2. Identification of strategic projects across all along the supply chain from mine sites to processing/refining projects.
  3. The act would also see the setting up of strategic reserves of these critical minerals.

All of this bodes well for our Investments across commodities identified as “critical minerals” giving these projects strategic importance on the world stage.

To see a list of all the critical minerals in the Australian Critical Minerals strategy document, check out the following link.

Here is a snippet from that speech:

Lithium prices now trading at all time highs

Sep 20, 2022

Macro: Lithium

The following Bloomberg article touches on the structural supply shortages experienced across the lithium supply chain.

This comes as the lithium price traded at a record high on Friday at US$71,315 per tonne.

For us, it points to just how important it is for the mining industry to make new lithium discoveries match the exponentially increasing demand for lithium.

Without massive investment in new exploration, we simply won’t have enough lithium to catch up with the demand from battery makers.

Last week, we saw a presentation from Benchmark Minerals Intelligence senior lithium analyst Dr Cameron Perks, who touched on the timing differential between building upstream (new lithium mines) and downstream demand (battery manufacturing facilities).

Whilst it could take ~25 years for a new discovery to be put into production, downstream facilities can be built as quickly as <24 months.

As a result, we see the shortage lasting for at least the next five years.

Read the full article here.

Our key takeaways:

  • Lithium carbonate traded at all time highs on Friday (US$71,315/ tonne) - almost 3x higher than this time last year.
  • Price increases coming from higher electric vehicle (EV) sales forecasts which are expected to hit a record 6 million this year, double the 2021 total.
  • Soc. Quimica & Minera de Chile SA (SQM), the world’s No. 2 lithium producer, predicted a “very tight market” in the years ahead.
  • Battery-makers and automakers are rushing to lock in reliable and stable lithium supplies. Still, the lithium price continues to remain extremely high.

We hold investments from the exploration stage up to development ready projects in the lithium space.

Below is a list of our lithium Investments:

Vulcan Energy Resources (ASX: VUL) - Next Investors Portfolio

  • Zero Carbon Lithium, development stage, Germany (European Union)

European Metals Holdings (ASX: EMH) - Wise Owl Portfolio

  • Lithium, development stage, Czech Republic (European Union)

Tyranna Resources (ASX: TYX) - Catalyst Hunter Portfolio

  • Lithium, exploration stage, Angola

Latin Resources (ASX: LRS) - Catalyst Hunter Portfolio

  • Lithium, exploration stage, Brazil

Ragusa Minerals (ASX: RAS) - Catalyst Hunter Portfolio

  • Lithium, exploration stage, Northern Territory

Battery materials demand will need more than 300 new mine

Sep 16, 2022

Macro: Lithium

The battery materials thematic is a major part of our Portfolio.

After a nasty down day for the market two days ago driven by inflation fears emanating from the US, we remain confident that this theme will be part of a decade long trend.

A recent Benchmark Mineral Intelligence report highlights just how much battery materials are needed for the world to reach its ambitious decarbonisation goals.

The report notes that, “At least 384 new mines for graphite, lithium, nickel and cobalt are required to meet demand by 2035.

Here are the companies in our Portfolio that we hold as exposure to each of the four battery materials referred to in the report (click the company name to see our Investment Memo):


Sarytogan Graphite (ASX:SGA) - early stage development, Kazakhstan

Evolution Energy Minerals (ASX:EV1) - late stage development, Tanzania


Tyranna Resources (ASX:TYX) - exploration, Angola

Latin Resources (ASX:LRS) - resource definition, Brazil

Vulcan Energy Resources (ASX:VUL) - development, Europe

Ragusa Minerals (ASX:RAS) - exploration, Northern Territory (recently acquired)

European Metals Holdings (ASX:EMH) - development, Europe


Galileo Mining (ASX:GAL) - exploration, Western Australia (currently in resource definition mode on PGE project)


Kuniko (ASX:KNI) - exploration, Europe (KNI also has a nickel project)

The report also had a great infographic outlining the required tonnages of the various materials which can be found below:

We note that one Barrenjoey analyst recently upgraded their forecasts for the lithium prices for 2023 and 2024 by 36% to and 86% respectively.

As a bellwether of the battery materials space, the lithium price remains strong:

We remain confident in our battery materials Investments now, as well as over a long term +3 year timeframe.

Zero Carbon Lithium Project update


Sep 13, 2022


Investment Memo: VUL IM-2022
Objective 1 : Complete Phase 1 Definitive Feasibility Study (DFS)

Having today announced that its sorption-demo plant was now under construction, Vulcan Energy Resources (FSE | ASX: VUL) also provided updates on other progress at its Zero Carbon Lithium™ Project.

VUL says its lithium hydroxide production Demo Plant, (CLP-Demo Plant) is also progressing and remains on track to start commissioning in late Q1 2023.

The company also provided updates on an upcoming 3D seismic survey in the Insheim license area with seismic teams mobilising to site this week. The survey, surrounding VUL’s existing geothermal operations, will lead toward an expanded development plan.

VUL also advised that it has received Preliminary EIA approval — its second second positive environmental approval — for its Taro license to drill wells for geothermal energy and lithium.

As outlined in our VUL Investment Memo, the key objective that we want to see the company achieve is completion of the DFS.

VUL says the DFS for Phase 1 of the project is progressing and is likely to be completed in Q1 2023. It is also working to provide an updated PFS for Phase 2, ideally completed at the same time.

Direct Lithium Extraction demo plant now being built


Sep 13, 2022


Investment Memo: VUL IM-2022

Vulcan Energy Resources (FSE | ASX: VUL) has begun onsite construction of its sorption-demo Direct Lithium Extraction (DLE) plant on the premises of local energy utility, Energie Südwest AG (ESW), in Germany.

This demo plant represents a key element of VUL’s strategy to de-risk its Zero Carbon Lithium™ Project, with technical and operations staff to train here ahead of construction of the first commercial plant.

VUL chose a sorption-type DLE approach for its lithium extraction business due to its demonstrated successful commercial deployment globally, and because this method optimally produces lithium chemicals from hot brines with low operating cost and sustainable footprint.

As sorption-type DLE typically requires the brine to be hot, and VUL intends to use the heat in the waste brine from its geothermal renewable energy operations. This removes the need to heat the brine with natural gas (which has become a scarce resource in Germany and the rest of Europe), as is needed at other commercial operations worldwide, and represents a significant financial and greenhouse gas emissions saving.

It also allows for the technology to be used on lower grade lithium brines compared to salar brines. Other advantages over traditional brine evaporation include higher lithium recovery, lower water and chemicals consumption, shorter lead time to production, and minimal land footprint.

The sorption-demo plant is scheduled to start operating in early 2023 after the start of cold commissioning later this year.

CEO Dr Francis Wedin explained that this was the logical next step to continue upscaling towards commercial production of lithium hydroxide with a net zero carbon footprint.

Structural shortage in lithium supply now a bigger problem

Aug 24, 2022

Macro: Lithium

The following Bloomberg article is more proof of how fragile the lithium industry's supply-demand situation is.

A shutdown in a particular part of China can quickly cascade into supply shortages, leading to increased prices and scenarios where end users cannot purchase the amount of lithium they need.

Read the full article here.

Our key takeaways:

  • Sichuan, a city home to more than a fifth of China's lithium production, is experiencing industrial power cuts. This means the already tight lithium market is experiencing more by way of supply shocks.
  • Supply disruptions are expected to lead to increased lithium prices.
  • Rystad Energy analyst (Susan Zou) said the following - "We are estimating the lithium price momentum will last for a while, and the spot price for lithium carbonate will climb to 500,000 yuan per ton (US$73,000 per tonne) shortly,"

Another article highlighting the structural supply shortages in the lithium industry.

For us, it points to just how important it is for the mining industry to make new lithium discoveries match the exponentially increasing demand for lithium.

Without massive investment in new exploration, we won't have enough lithium to catch up with the demand from battery makers.

We hold investments from the exploration stage up to development ready projects in the lithium space.

Below is a list of our lithium Investments:

Vulcan Energy Resources (ASX: VUL) - Next Investors Portfolio

  • Zero Carbon Lithium development stage, Germany (European Union)

European Metals Holdings (ASX: EMH) - Wise Owl Portfolio

  • Lithium, development stage, Czech Republic (European Union)

Latin Resources (ASX: LRS) - Catalyst Hunter Portfolio

  • Lithium, exploration stage, Brazil

Ragusa Minerals (ASX: RAS) - Catalyst Hunter Portfolio

  • Lithium, exploration stage, Northern Territory

Green light from local councils & new licence area


Jul 26, 2022


Investment Memo: VUL IM-2022
Objective 3 : Expansion of scope
Risk 4 : Stakeholder risk

Our zero carbon lithium and geothermal Investment Vulcan Energy Resources (ASX:VUL) has received the green light from eight local councils to carry out 3D seismic survey work across the company’s project area in Germany.

VUL says that positive momentum is building at the local level for its Zero Carbon Lithium™ Project and that so far, all local votes for its Phase 1 area work plan applications have been positive.

This is news that we like to hear, as VUL being granted local approvals was an issue that some commentators had previously questioned.

The 3D seismic survey work is planned to start in September and will assist in planning future development drilling.

VUL also reported that it has been granted a new exploration license (“Ried”), increasing its license area in the Upper Rhine Valley Brine Field (URVBF).

Importantly, this expands the size of VUL’s project area by 24% to a total of 1,440km2 over what is already the largest JORC compliant lithium resource in Europe.

The Upper Rhine Valley region has seen extensive exploration and development historically conducted by oil and gas companies, and this new licence area comes with some existing 3D seismic data.

VUL is leveraging the work done by the hydrocarbons industry to cut the time needed to gather data and accelerate the Zero Carbon Lithium™ Project.

VUL's exploration licences in the Upper Rhine Valley Brine Field (URVBF)

Noosa Mining Investor Conference round-up

Jul 22, 2022

Macro: Commodities

Spanning three days on the pristine Sunshine Coast of Queensland, the Noosa Mining Investor Conference kicked off its 12th year on Wednesday. Attracting a diverse and large spread of corporates, brokers, retail and institutional investors, this year’s event featured over 60 companies presenting and over 1,000 people in attendance, all hosted within the coastal town's Peppers Resort.

At the event, we caught up with a number of executives from our Investment companies (including AKN, AOU, BPM and PFE) as well as companies of interest, either as potential additions to one of our Portfolios, or to gain expert insight to macro and regional headwinds impacting the markets.

The conference is held in the ideal location to mix work with pleasure, and meet a host of CEOs of ASX juniors. Each day ends with a short ‘business at the bar’ session that quickly morphs into talking tactics about where to eat and drink. On Thursday and Friday nights, many head to the Noosa Surf Club for its networking sessions, enjoying its glassed indoor area and open deck to the beach.

We look forward to providing updates on companies we met with down the road.

Tesla profit jumps, ASX lithium stocks jump

Jul 22, 2022

Macro: Lithium

Yesterday, Elon Musk’s Tesla notched a 57 per cent jump in adjusted earnings per share (EPS) in its latest quarter, a 42% rise in revenue on this time last year and forecasted annual sales growth of 50 for the foreseeable future:

The good numbers out of Tesla were enough to see a number of ASX listed lithium stocks jump on the news, including three of our lithium Investments.

These include the following (with yesterday’s moves):

Vulcan Energy Resources (ASX:VUL) - +8.76%

Latin Resources (ASX:LRS) - +8.33%

European Metals Holdings - +5.33%

What we think is playing out here is perhaps a bit of market pushback against bearish lithium narratives - which in part originated out of Goldman Sachs and Credit Suisse in mid-June.

This, despite the lithium price holding steady at a very elevated level for the last three months:

After tax loss selling in June slowly ground to an end - we’re seeing a bit of life coming back into the market - with potentially a bit of bargain hunting going on.

We remain bullish on lithium’s prospects as part of a decade-long battery metals boom and remain long-term holders of the three companies listed above.

There’s an easy way to see these companies on our portfolio page, along with our other portfolio filters (click the image to see our lithium companies all in one place):

China considering US$1.1 trillion infrastructure stimulus

Jul 15, 2022

Macro: Commodities

China plans to make up to US$1.1 trillion in financing available for infrastructure spending, which we think will increase commodity demand. Read the following Bloomberg article for details.

Read the full article here.

Below are our key takeaways:

  • China is making 7.2 trillion yuan ($1.1 trillion) in funds available for infrastructure spending.
  • According to Citigroup, infrastructure investment in 2022 is likely to rise by 7.7% versus 2021.
  • President Xi Jinping has called for an “all out” effort to increase infrastructure spending this year to fuel economic growth and meet a GDP growth target of around 5.5%.

The Bloomberg article touches on the impacts of China’s COVID induced lockdowns on the domestic economy.

With economic growth tipped to slow, the Chinese government is getting ready to lean on fiscal stimulus through infrastructure investment to spur economic growth.

We think this type of fiscal stimulus is likely to become a common theme in China and the West, with macro themes like decarbonisation requiring massive CAPEX.

This infrastructure spending forms part of our “commodities supercycle” investment thesis, where we see increased fiscal stimulus and CAPEX investment spurring higher demand for commodities already facing supply shortages.

Environmental and community support for geothermal project


Jul 08, 2022


Investment Memo: VUL IM-2022
Risk 4 : Stakeholder risk

VUL today reported that it has received preliminary Environmental Impact Assessment (EIA) approval for its Taro license, paving the way for VUL to drill six wells for geothermal energy and lithium.

The State Office for Geology and Mining determined that “the environmental impact of the planned wells, taking into account their size, extent and intensity of action, cannot be assessed as significant. There is therefore no requirement to carry out a full environmental impact assessment for the wells”.

VUL has also confirmed today that community support for geothermal production is growing across Germany’s Upper Rhine Valley region, with the Upper Rhine Council having resolved in favour of supporting deep geothermal projects in Ortenau. This follows an earlier vote of support for geothermal energy production in the area from the City Council of Landau.

These endorsements address some of the Stakeholder Risk as outlined in our 2022 VUL Investment Memo.

Lastly, VUL has provided an update on progress at its Demo Plant at the Zero Carbon Lithium™ Project in Germany.

VUL says that initial commissioning of the Sorption Demo Plant is now planned to commence in late-Q4. This is behind schedule due to previously flagged, unprecedented global supply chain issues with sourcing certain pieces of equipment. However, the commissioning of ‘LiLy’ — VUL’s lithium hydroxide production Demo Plant — remains on track to start commissioning in late Q1 2023.

Binding agreement with leading Italian geothermal group


Jul 08, 2022


Investment Memo: VUL IM-2022
Objective 5 : More strategic partnerships (to demonstrate execution)

Continuing to grow and diversify its project development portfolio, Vulcan Energy Resources (ASX: VUL | FSE: VUL) today announced it has entered a binding collaboration agreement with Italy’s largest geothermal energy producer, Enel Green Power (EGP).

EGP, part of the Enel Group, is dedicated to the development of energy generation from renewable sources. A global leader in geothermal energy, it has plants in Italy, Chile and the United States.

Under the agreement, VUL and the Italian renewable energy giant will explore future geothermal lithium opportunities for cooperation. This includes assessing the potential of VUL’s Italian project, the Cesano Permit, in a stepwise approach, starting with a joint scoping study.

The Cesano Permit extends over an area of 11.5 km2, 20 km NNW of Rome. EGP has previously explored and drilled a number of wells in the Cesano area and gathered relevant data directly from local reservoirs, including wells that yielded hot geothermal brine with high lithium values.

VUL and EGP will also evaluate the opportunity to cooperate on other geothermal lithium projects in Italy.

China considering US$220Bn in infrastructure stimulus

Jul 08, 2022

Macro: Commodities

The following Bloomberg article highlights China’s plan to spend up to US$220 billion to spur economic growth through infrastructure spending.

All of this new infrastructure will require more commodities.

Read the full article here.

Below are our key takeaways:

  • China’s Ministry of Finance is considering US$220 billion of infrastructure funding aimed at shoring up the country’s beleaguered economy.

  • The funding is to be brought forward from next year’s quota, marking the first time the issuance has been brought forward due to concerns around the dire state of the world’s second largest economy.

  • The funding would primarily be used on infrastructure spending to boost an economy hit by Covid lockdowns and a housing downturn.

  • Commodities rallied in European trading hours following the news, with copper moving 3.6% higher on the London Metal Exchange.

For over two years, we have been writing about an upcoming commodities supercycle brought about by infrastructure spending, following decades of underinvestment in the “real economy”.

All this investment in the “real economy” requires raw materials, which is why we think the macro backdrop for commodities over the next decade is strong.

The Bloomberg article highlights the readiness of the Chinese government to lean on fiscal stimulus to spur economic growth at a time when the Chinese economy is slowing down.

Generally, governments would try to respond to slowdowns in economic growth by cutting interest rates. With this tool exhausted after the COVID pandemic, we think infrastructure spending will become the new policy of choice for governments worldwide.

Again, this infrastructure spending will increase demand for commodities which we expect will take commodity prices higher.

VW CEO breaks down batteries and supply chain issues

Jul 08, 2022

Macro: Commodities

The following Bloomberg article showcases the moves major carmaker Volkswagen is making in the batteries industry.

Read the full article here.

Below are our key takeaways:

  • VW is pressing forward with investments along its battery supply chain, commencing construction at a new cell factory in Salzgitter, Germany, one of five facilities in Europe under the carmaker’s PowerCo subsidiary.
  • Salzgitter is home to VW’s main motor factory, and it is where the company last year opened an $80 million facility to research, develop and test EV batteries.
  • Roughly $2 billion will be invested in the new cell factory, where production is scheduled to begin in 2025.
  • VW expects its battery business to generate €20 billion in revenue by the end of this decade.
  • VW CEO Herbert Diess said, “We are invested in some startups and we are looking forward to a joint venture together with Bosch for the machine tools and equipment for those plants, so we’re really gearing up to become one of the bigger battery cell producers”.

The news is just another sign that downstream investment in battery supply chains is showing no signs of slowing down.

VW is one of the world's largest carmakers and is heavily investing in downstream production capacity. It expects this part of its business to generate over €20 billion in revenues by the end of the decade.

This is a situation where investment in midstream/downstream (manufacturing/battery industry) is far ahead of upstream investment (mining), this leads to the supply/demand imbalances for the raw materials required to produce batteries only becoming worse.

The imbalance comes from the timing of these mega projects. Building a downstream / midstream facility could take 1-4 years whereas it takes around 7 years on average to bring a new resource discovery into the production stage.

As a result, we think that raw materials prices will remain high for at least the next decade whilst the mining industry catches up to demand.

Stellantis to become a substantial shareholder, invests $76M


Jun 24, 2022


Investment Memo: VUL 2022

Objective #2: Secure Project Financing

Objective #5: More Strategic Partnerships

Vulcan Energy Resources (ASX:VUL) today announced that it has agreed to a A$76M (€50M) equity investment from Stellantis N.V., plus a 5-year extension to their offtake agreement.

This investment marks the world’s first upstream investment by a top tier automaker into a listed lithium company.

We were very surprised (positively) by this announcement - having a key offtaker as a substantial shareholder is a huge win for VUL, and a strong signal to the broader lithium market that has been rattled in recent weeks.

Not to mention a material cash injection at a time of tightening capital markets.

Once the fully paid ordinary shares are issued, Stellantis will become the company’s second largest shareholder with a 8% shareholding. The shares are to be issued at the 30-day Volume Weighted Average Price of A$6.622 (€4.367) per share, representing ~11.45M shares.

Stellantis is one of the world’s leading automakers and has 14 vehicle brands and two mobility companies — Abarth, Alfa Romeo, Chrysler, Citroën, Dodge, DS Automobiles, Fiat, Jeep®, Lancia, Maserati, Opel, Peugeot, Ram, Vauxhall, Free2move and Leasys.

It also has one of the largest electrification and decarbonisation plans of any automaker globally: to reach 100% of European passenger car sales to be battery electric vehicles (BEV) by 2030.

On that note, Carlos Tavares, Stellantis CEO, said, “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”.

Today’s announcement sees further progress against two of our 2022 objectives for VUL, per our Investment Memo:

Objective #2 - Secure Project Financing

While VUL is already financed through to completion of its DFS, it plans to use the Stellantis proceeds for its planned production expansion drilling in its producing Upper Rhine Valley Brine Field.

Objective #5 - More strategic partnerships

VUL had already locked away much of its first five years of its initial forecast lithium production, including with Stellantis. Today’s announcement has extended that binding lithium hydroxide offtake agreement with Stellantis by five years, to 2035.

Local support for Zero Carbon Lithium Project; project expansion


Jun 17, 2022


Investment Memo: VUL 2022

Objective #3: Expansion of Scope

Vulcan Energy Resources Ltd (ASX:VUL | FSE: VUL) announced today that the City Council of Landau has voted to support geothermal energy production at VUL’s dual geothermal energy and Zero Carbon Lithium project in Germany’s Upper Rhine Valley.

The Council voted to support geothermal energy production in the area and has taken a positive stance towards the extraction of lithium from geothermal brine in consideration of climate protection goals and the interests of regional urban development.

The announcement follows news this week, as reported in the AFR, that the European Chemicals Agency (ECHA) to the European Commission has proposed to increase regulatory requirements around the control, processing, packaging, and storage of lithium. However, VUL CEO Francis Wedin said that the ECHA’s proposal is based on incorrectly interpreted applications of the classification criteria and did not take into full consideration more recent studies on the subject.

Adding to its growing pipeline of projects, VUL also announced today that it has increased its Exploration Licence Area by 141km2 to a total of 1,163km2.

This is inline with Objective #3 for VUL in 2022, Expansion of Scope, as outlined in our Investment Memo: “We want to see the company expand its scope for future lithium production by acquiring more land holdings and more projects to help meet anticipated rising demand”.

VUL: Heat offtake - Germany's largest municipal energy supplier


Apr 06, 2022


Our most successful investment to date, Vulcan Energy Resources (ASX:VUL) is now not only a Zero Carbon lithium company but also a renewable geothermal energy company.

Today’s deal with MVV, Germany’s largest municipal energy suppliers, is for between 240,000MWh - 350,000MWh per year to households in Mannheim near Frankfurt, Germany.

VUL says this will be the first of many heat offtake agreements, something we flagged in our VUL Investment Memo:

As long-term holders of VUL, we’re pleased that Monday’s AFR coverage was followed up by a binding purchase agreement.

We also note that MVV is 50.1% owned by the City of Mannheim, indicating to us that VUL’s stakeholder engagement efforts in the Upper Rhine Valley may bear further fruit.

Mannheim is home to ~300,000 residents and you can see how the city is close to VUL’s string of licences in the Upper Rhine Valley:

For a quick high-level summary of our VUL investment thesis, risks and key objectives - here’s our VUL Investment Memo.

Expediting geothermal energy amid German energy crisis


Apr 05, 2022

As reported in the AFR, Vulcan Energy (ASX:VUL) is upping its focus on its geothermal business in Germany amid Europe’s energy crisis.

Just over half of Germany’s energy consumption is used to produce heat and the main fuel used is gas, half of which comes from Russia.

But now, with gas prices surging after Russia’s invasion of Ukraine, Germany is scrambling to secure local energy supplies and wean itself off its dependence on Russian gas imports.

The AFR quoted VUL Chairman Gavin Rezos, who explained that “Germany’s first response was wind and solar. But now they are looking at the assets they have, and geothermal is the way forward.”

While much of the enthusiasm around VUL to date has been to do with its world first Zero Carbon Lithium ambitions, the geothermal energy side of its business has been seen as somewhat of an afterthought.

Located in the Upper Rhine Valley, VUL already has a 5 megawatt operational geothermal plant. It is now looking to convert that energy to heat, which would allow it to produce about 35 megawatts of heat for local use.

While geothermal is still a relatively expensive way to produce baseload power, VUL says that “in heating, [geothermal] is in pole position”.

The company is now stepping up efforts to sign offtake heat agreements and is lobbying planning authorities to cut red tape.

This was something that we identified in our VUL 2022 Investment Memo, with securing heat offtake agreements outlined as one of the five objectives that we want to see VUL achieve this year.

(You can see all five of those objectives, plus our reasons for continuing to hold VUL this year — even after its impressive share price rise in recent years — in our VUL Investment Memo here.)

Once offtake agreements are secured, VUL will make some infrastructure adjustments at its geothermal plant to switch from electricity to heat production, while the Upper Rhine Valley already has a lot of the core heating-supply infrastructure in place.

Rezos said that the opportunity in geothermal has also prompted VUL to look at potential additional medium- to longer-term opportunities on the French side of the Upper Rhine Valley and in Italy.

CEO Francis Wedin added, “We have the drillers, the rigs, the operations. We are already a producer, we just want to repeat these plants on a larger scale across the Upper Rhine Valley.”

Project update


Mar 18, 2022

Today VUL provided an update on its Zero Carbon Lithium project in Germany.

The first point covered was around the development works of its Direct Lithium Extraction (DLE) demo plant. At this stage, ~80% of all of the equipment is ordered and off site prefabrication works have started. VUL is expecting the demo plant commissioning stage to begin in the middle of this year.

VUL also confirmed that its DLE pilot plant was still operating and showing lithium recovery rates averaging ~94-95%. Importantly, this is well above the recovery rates used in the 2021 Pre Feasibility Study (which was assuming 88-90% recovery rates). The change might not sound big but the incremental difference makes a huge difference to project economics.

VUL also announced that it had kicked off discussions with BNP Paribas who would be helping secure project financing after the completion of the definitive feasibility study (DFS) which VUL expects to be completed in the second half of 2022.

Overall today’s announcement directly speaks to our Objectives #1 and #2 for VUL, as per our 2022 Investment Memo, which can be viewed here.

In particular, we think that the lithium recovery rates are important and should feed through to improved project economics when that DFS is completed. The 2021 PFS which delivered a €2.25 billion NPV was estimated using a US$14,925 lithium hydroxide price, compared to current spot prices of ~US$78,000.

We think there's a strong chance that VUL puts together a DFS with improved project economics, and hope that this leads to eventual project financing to propel its Zero Carbon lithium project into the development stage.

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