Vulcan is red-hot and ready to blow after automaker Stellantis buys in for a cool $76 million
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Vulcan Energy (ASX:VUL) has some huge news, after global top-5 automakers Stellantis, which includes the Opel, Peugeot, Citroen, Fiat and Chrysler brands, locks in a mega-buck equity investment.
It’s the kind of move that vehicle manufacturers have been talking about, chief executives have been calling for – and the market has been impatiently craving.
The expectation that global automakers would start investing upstream to secure battery minerals essential for electric vehicles has been brewing for quite some time.
It’s a no-brainer that car firms would seek greater control over their supply chain while demand for lithium, cobalt, nickel, and graphite surge beyond future supplies.
In April, we saw Elon Musk post to Twitter that Tesla “might have to get into lithium mining and refining” because of sky high prices and a long lead time to production – he then struck a deal with Brazilian mining giant, Vale, to purchase nickel not long after.
German auto maker Volkswagen has revealed the company needs to become “actively involved in the raw material business” and move further down the supply chain when sourcing batteries.
But today, we don’t need to look much further than ASX lithium and renewable energy darling Vulcan Energy Resources (ASX:VUL) to see how the transformation is playing out.
Leading automaker, Stellantis, will become the second largest shareholder in Vulcan with an 8pc stake following an equity investment of A$76m (€50M).
Vulcan and Stellantis have also extended their binding lithium hydroxide offtake agreement by five years to 2035.
In an interview with Stockhead, Vulcan managing director Francis Wedin says that while this move marks the first time an automaker has invested upstream in a listed lithium company, it will be the first of many more to come in the industry.
“It’s a major tick of confidence by a top-five global auto manufacturer,” Wedin says, referring to an intensive due diligence process carried out by Stellantis.
“What’s been made very clear to us is that the net zero-carbon footprint of our lithium product is extremely important to them.
“Making sure this project is successful from a sustainability perspective is extremely important to Stellantis – they want to be closer aligned so they can see how we are developing this project and to make sure that it is doing what it says it does, and work together with us every step of the way.”
Wedin added the capital injection from Stellantis will be used for planned production expansion drilling at the company’s Zero Carbon Lithium™ project in Germany’s Upper Rhine Valley Brine Field (URVBF) where VUL plans to extract both lithium and renewable energy from geothermal brines.
“The plan is that we pump the brine to the surface, and we produce renewable energy from it, particularly heating which is very topical in Europe at the moment, and we extract the lithium after that, before reinjecting the brine,” Wedin explains.
Vulcan’s plan to produce lithium with a net zero carbon footprint is one of its biggest selling points as the EU moves to introduce a ‘battery passport’ that traces the content and carbon footprint of batteries in the sub-continent from 2027 onwards.
Thresholds will be set for the minimum sustainability requirements for batteries produced, sold, and used in Europe meaning automakers will need to source and produce cleaner, more sustainable batteries.
“Car firms want to make sure the electric vehicle is a truly sustainable product when it’s handed over to the customer before it has even started driving around,” Wedin explains.
In the rush towards net-zero, global automakers have embraced the decarbonisation challenge, with reports suggesting the sector will spend more than half a trillion dollars on electric vehicles and batteries through to 2030 to meet targets.
To date, Vulcan has signed up five consumers for binding lithium hydroxide offtakes in Europe including Volkswagen – the largest company in Germany, Renault, Stellantis – one of the largest car groups in the world that covers Opel, Fiat, Chrysler, Peugeot and Citroen, LG Energy Solution and Umicore Group – a leader in cathode materials production.
But when it comes to having the largest electrification and decarbonisation plans of any automaker globally, Stellantis takes the cake.
Not only is the automaker building multiple battery cell manufacturing plants in Europe and the United States with a total capacity of 400 gigawatt hours by 2030, but it also plans to reach 100pc of passenger battery electric vehicle sales in Europe by 2030.
“We are fully aligned with Stellantis’ decarbonisation and electrification goals,” Wedin said.
“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.”
This article was developed in collaboration with Vulcan Energy Resources, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.