EV is the next strong sector after Precious Metals to be in.
And VUL offers considerable long term potential as an investment IMO/
VULCAN ENERGY RESOURCES (VUL)
Market Cap: $63m
You have already read my previous posts indicating that we are entering into a EV (electric vehicle) boom phenomenon that will define the new era in the motor vehicle industry.
EV is the very reason why Tesla stock is going gangbusters, and it is expected that EV will become the dominant vehicle type replacing fuelled vehicles in US and Europe. Which explains the rush to produce lithium.
Most of lithium produced are from China and involves considerable environmental degradation in both CO2 emissions and water usage.
And you may have read about Europe is aiming for carbon neutrality by getting rid of its CO2 emissions by moving out completely from carbon based power plants and moving into electric vehicles with low carbon footprint.
I am a sucker for a first-in-breed robust IP with great value proposition that has a huge addressable market.
And this is where VUL comes into the picture.
VUL technology is ZERO CARBON LITHIUM (ZCL). Its Zero Carbon Lithium enables lithium to be produced with zero carbon and the Europeans love it.
The Europeans love it because ZCL enables European car makers to achieve negative carbon footprint allowing them to reach sustainability targets by offsetting CO2 generated by other supply chains.
Europe is undergoing a once-in-a-lifetime switch to electric vehicles. This has made it the fastest growing lithium-ion battery production centre in the world. It has ZERO local supply of lithium hydroxide to feed this demand. 80% of global supply is controlled by China. The EU will tax lithium-ion batteries based on their carbon footprint: a “CO2 Passport”. European auto-manufacturers want to produce Zero Carbon EVs. No low-carbon or low-water source of lithium currently exists.
And you may have also read that Europe is looking to reduce their reliance on China for strategic minerals (which includes lithium).
VUL is in the right space at the right time
Being the only lithium producer with zero carbon footprint
Being located in the heart of Europe in Germany within striking distance from major car manufacturers , reduces logistic costs
Loved by Europeans so much they will be funded by a European consortium
Has enough lithium resource (15.37m MT) to cater to entire European car market for years
If I can summarise VUL, it is an invention by Europeans (Swedish&German) for Europeans. The ZCL is a brainchild of its MD Dr Francis Wedin (a Swede and Australian nationality) and Dr Horst Kreuter.
VUL is IMO a 5-10 year long term investment that offers incredible upside due to its technology, geographical location and backing it has received. Its resource is even larger than GXY (Galaxy Resources) which is already a $640m company. VUL is an earlier stage $60+ m company going into PFS stage with 3-4 year timeline to production with excellent prospects making it a dream investment for ESG investing.
Alster Research’s valuation in March 2020 Based on the 181 mg/l lithium concentration in the brine, a resource mineral resource estimate of 13.9Mt LCE has been indicated for Vulcan Energy Resources, placing it at the very top of the rankings for the peer group of exploration projects in Europe – all of which are based on hard rock deposits.
However, at this stage Vulcan’s market valuation does not reflect the size of the lithium resource.
Nevertheless, with the project’s resources having only just been confirmed in December 2019, going forward they will from now appear in any comparative analyses performed by various issuers, which will attract increasing attention among investors due to the project’s outstanding magnitude.
Raising capital remains a key aspect for the implementation of the zero-carbon project in the Upper Rhine Valley. While the funds required for Stage 1 remain relatively lean at around US$55 million.
It is estimated that for the period 2024-2027 cash inflows of US$960 million will cover the total anticipated capex of US$848 million.
After the ramp-up phase from 2022 to 2023, which will be characterised by high capex, the investment will then pay for itself within a four-year period.
By discounting its modelled cash flow projection, Alster calculated an enterprise value for Vulcan at US$769 million — corresponding to around €700 million or A$1.3 billion.
Assuming dilution from raising additional equity as required, Alster determined a per share valuation of €1.45, or A$2.45 and provided and initial “buy” investment recommendation.
Clearly, there’s significant upside potential on offer here for investors, while the coming four years will see a large volume of newsflow as Vulcan progresses towards commercial production.
