Report
Vulcan Energy : Vulcan: Europe’s 1st carbon-neutral integrated lithium play – high risk, high return
We initiate coverage on Vulcan Energy with an Outperform rating and a TP of €4.0. The company is progressing towards full funding, and thus becoming the first carbon-neutral geothermal powered European lithium hydroxide producer using European lithium. Vulcan is likely to sell close to 100% of the output via legally binding take or pay contracts, but profitability beyond the initial contract duration depends on the lithium market price. That said, even at today’s multi-year low prices, assuming Vulcan will obtain a material premium for being European and carbon-neutral, sales, profitability levels and FCF will be more than robust. In a scenario with a selling price of €16k/mt (which we believe is a reasonable assumption given a bottom-up approach) we get to a TP of €4.0 ps. If the price moves to the level Vulcan projects (c. €22k/mt), which is our Bull+ case, that price target would move to over €8 ps.
Underlying
Vulcan Energy Resources
Provider
Oddo BHF
Oddo Securities provides securities brokerage and research services. The company offers equity, economic, and derivatives research and credit analysis services. It focuses on insurance, automotive, building materials, pharmaceuticals, telecommunications, information technology, and agri-food industries.
Martijn Den Drijver
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