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Reduced CAPEX | Reduced risk | Low cost | Robust financials | Execution ready

First integrated renewable geothermal energy, and lithium hydroxide producer with net zero greenhouse gas emissions. Securing Europe’s lithium supply chain

November 16, 2023 – Vulcan Energy Resources Limited (Vulcan; ASX: VUL, FSE: VUL, the Company) is pleased to announce the results of its Bridging Engineering Study for Phase One of Vulcan’s Zero Carbon Lithium™ Project.

Meeting EU’s battery electric vehicle critical raw material needs

-       Targeting approximately 24,000 tonnes lithium hydroxide (LHM) production capacity[1][2] per annum from Phase One, enough for ca. 500,000[3] Battery Electric Vehicles (BEVs) per annum.

-       Fully aligned with EU and German policy towards greater vertical integration of battery supply chain, and onshoring of Critical Raw Materials, including the Green Deal Industrial Plan and Critical Raw Materials Act.

Providing affordable, baseload renewable energy, and employment for local communities:

-       Targeting co-production of up to 560 GWh/a[4] of baseload renewable heat for local community district heating and internal consumption.

-       Targeting co-production of up to 275 GWh/a of baseload renewable power, to be sold to grid at Feed-in Tariff rates.

-       Thousands of direct and indirect jobs created through construction into operation, linked to the energy transition, decarbonisation and electrification of transport.

5 KEY OUTCOMES

1. REDUCED RISK: Streamlining into one core production area that is already commercially producing brine, with increased lithium reserves.

2. REDUCED CAPEX: ~€100m reduction down to est. €1,399m, combining assets, whilst moving to higher project definition.

3. LOW COST: Further decline in OPEX to est. €4,022/t LHM, one of the lowest on the industry cost curve, while maintaining green credentials.

4. ROBUST FINANCIALS: Maintained est. NPV at €3.9Bn (A$6.5Bn) pre-tax, €2.6Bn (A$4.3Bn) post-tax, €705m target annual revenues. 4y payback, despite lower lithium prices.[5]

5. EXECUTION READY:

-          Class 2 cost estimate, ready to award key EPC(m) contracts.

-          10,000s of hours of successful in-house A-DLE piloting completed.

-          €50m Optimisation Plants starting up.

-          Launching project level debt and equity financing with strong support.

5 KEY OUTCOMES DETAILED

1. REDUCED RISK:

ONE CORE PRODUCTION AREA:

-            Improved Field Development Plan (FDP), from two production areas down to one core production area that is already commercially producing brine.

-            Reduction of two upstream lithium plants to one central plant.

-            Simplified upstream design enabling easier operation and maintenance, modular.

INCREASE IN RESERVES:[6]

-            State-of-the-art data acquisition results in increase of Phase One Lionheart Proved and Probable Reserves to 0.57 Mt Lithium Carbonate Equivalent (LCE) @ 181 mg/l Li in the core “Lionheart” area, centred around current production wells in core of the URVBF field.

-            Resource of 4.16 Mt LCE @ 181mg/l Li in the Phase One Lionheart area, of which 2.11 Mt LCE is in the Measured category.

-            Largest lithium Resource in Europe[7] of 27.7 Mt LCE @ 175 mg/l Li, shows significant scope for pipeline of further phased development, with a modular approach to further plant build.

2. REDUCED CAPEX: ~€100m reduction down to est. €1,399m, combining assets, whilst moving to higher project definition (Class 2 Estimate).

3. LOW COST:

IN A VOLATILE WORLD, LOW-COST PROJECT AND MORE STABLE PRICING:

-       Very low OPEX estimated at €4,022/t lithium hydroxide, due to smart use of available heat to drive the process. Combined with offtake agreements with Tier One customers, supports stability during payback period, and protection from lithium price fluctuations.

PEERLESS ENVIRONMENTAL CREDENTIALS:

-       Use of integrated renewable energy to enable net zero carbon footprint in process.

-       Determined as a low environmental and social impact project due to small land requirements and being situated in industrial and agricultural areas.

-       Vastly reduces transport distance of lithium supply chain and secures European supply for European automakers.

-       Usage of modern adsorbent technology requires low reagents.

-       Integration of water recycle streams to enable very low net water consumption.

-       A world first of net energy positive operation, producing more renewable energy than it consumes.

4. ROBUST FINANCIALS: Maintained estimated NPV[8] at €3.9Bn (A$6.5Bn) pre-tax and €2.6Bn (A$4.3Bn) post-tax, and €705m target annual revenues. 4.2y payback despite a cyclical drop in lithium prices

Table 1 Bridging Study Phase One financials.

5. EXECUTION READY:

-            Class 2 cost estimate, ready to award key EPC(m) contracts.

-            10,000s of hours of successful in-house A-DLE piloting completed.

-            €50m Optimisation Plants starting up.

-            Launching project level debt and equity financing with strong support.

HIGHER PROJECT DEFINITION:

-            Reduced uncertainty provides Class 2 cost estimate, ready to award key contracts.

-            Key land parcels acquired for initial execution phase. Preparatory works conducted on first site.

-            EPCM tender process very advanced, contractor to be named in Q1/Q2.

-            Key permits are on track, having been received or have been submitted.

PROVEN COMMERCIAL TECHNOLOGY | UNIQUE IN-HOUSE EXPERTISE:

-            Adsorption-type Direct Lithium Extraction (A-DLE) used in process, which constitutes 10% of lithium production today, and set to increase to 15% of market share in the next 10 years due to its cost, purity and sustainability advantages.

-            Vulcan using its own proprietary in-house adsorbent, VULSORB®, which has shown a high performance relative to “off the shelf” products.

-            10,000s of hours of successful in-house pilot plant performance conducted, showing >90% lithium recoveries, and 1000s of cycles of sorbent life with no loss of capacity, reducing est. OPEX.

PRODUCTION TEAM IN TRAINING:

-            Lithium Extraction Optimisation Plant (LEOP) in final stages of commissioning, opening scheduled for next week; Central Lithium Electrolysis Optimisation Plant (CLEOP) progressing well.

-            Together these represent a ca. €50m investment by the Company, towards optimisation, operational training and product qualification facilities to enable commercial operational readiness.

-            These will produce the first tonnes of lithium chemicals ever fully domestically produced in Europe.

-            Optimisation plant built to start sending volume of product to off takers for pre-qualifications testing.

SIGNIFICANT PROGRESS ON FINANCING:

-            Debt-financing market sounding successfully completed, led by BNP Paribas. Commercial and development banks under NDA expressed strong interest, awaiting formal start of process.

-            Substantial in-principle financing support received from government-backed Export Credit Agencies (ECAs) for financing, from France, Italy, Canada and Australia.

-            Financing process with strategic investors for equity at the project level commencing.

-            Financing and project execution timeline adjusted and now aligned to coincide with public grant funding application processes.

Vulcan Managing Director and CEO, Cris Moreno, commented:

“The significant efforts by the Vulcan team to produce such a robust Bridging Study are commended.

“This Bridging phase has delivered significant value improvements including a reduction in CAPEX and OPEX, while also increasing and streamlining our project definition.

“Our financials are robust as we have maintained our low-cost position and along with our binding lithium offtake agreements, represent a compelling case in volatile times.

“The Zero Carbon Lithium™ Project is a significant energy and critical raw materials investment in Europe, for Europe.

“Our project secures a zero fossil fuels lithium supply chain for 500,000 EVs per year and also secures renewable heat and energy for thousands of German households.

“Next week, we will formally open our first Lithium Extraction Optimisation Plant, which once in production will represent the first tonnes of domestically produced lithium chemicals in Europe.

“We now move into debt and project-level equity financing, supported by BNP Paribas, after strong support from commercial banks, development banks and government-backed export credit agencies. Our financing and project timeline now aligns with public funding schemes which have just opened in Europe.”

PHASE ONE ZERO CARBON LITHIUM ™ PROJECT BRIDGING STUDY SUMMARY STARTS PAGE 8

About Vulcan

Founded in 2018, Vulcan’s unique Zero Carbon Lithium™ Project aims to decarbonise lithium production, through developing the world’s first net carbon neutral lithium business, with the co-production of renewable geothermal energy on a mass scale. By adapting existing technologies to efficiently extract lithium from geothermal brine, Vulcan aims to deliver a local source of sustainable lithium for Europe, built around a net zero carbon strategy with exclusion of fossil fuels. Already an operational renewable energy producer, Vulcan will also provide renewable electricity and heat to local communities. Vulcan’s combined geothermal energy and lithium resource is the largest in Europe, with licence areas focused on the Upper Rhine Valley, Germany. Strategically placed in the heart of the European electric vehicle market to decarbonise the supply chain, Vulcan is rapidly advancing the Zero Carbon Lithium™ Project to target timely market entry, with the ability to expand to meet the unprecedented demand that is building in the European markets. Guided by our Values of Climate Champion, Determined and Inspiring, and united by a passion for the environment and leveraging scientific solutions, Vulcan has a unique, world-leading scientific and commercial team in the fields of lithium chemicals and geothermal renewable energy. Vulcan is committed to partnering with organisations that share its decarbonisation ambitions and has binding lithium offtake agreements with some of the largest cathode, battery, and automakers in the world. As a motivated disruptor, Vulcan aims to leverage its multidisciplinary expert team, leading geothermal technology and position in the European EV supply chain to be a global leader in producing zero fossil fuel, net carbon neutral lithium while being nature positive. Vulcan aims to be the largest, most preferred, strategic supplier of lithium chemicals and renewable power and heating from Europe, for Europe; to empower a net zero carbon future.

Corporate Directory

For and on behalf of the Board

Daniel Tydde | Company Secretary

Media and Investor Relations contact

Australia:

Annabel Roedhammer

Vice President Communications and Investor Relations

aroedhammer@v-er.eu

+49 (0) 1511 410 1585

Please contact Vulcan’s Legal Counsel Germany, Dr. Meinhard Grodde, for matters relating to the Frankfurt Stock Exchange listing on mgrodde@v-er.eu.

Reporting calendar

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[1] See Production Target Material Assumptions and Parameters on page 130 and “Ore Reserves” section 1.5.3 for assumptions.

[2] These are targets which may not be achieved.

[3] Based on Vulcan internal estimated average EV battery size and chemistry in Europe.

[4] To be read in conjunction with Production Target Material Assumptions and Parameters on page 130. 

[5] Please see "Economic Analysis" section (section 1.12) for full list of assumptions and targets.

[6] See Competent Person Statements on page 129.

[7] According to public, JORC-compliant data. Refer Vulcan Zero Carbon Lithium™ Project Phase One DFS results and Resources-Reserves update <https://www.investi.com.au/api/announcements/vul/e617fca6-6d4.pdf 2022/02/13 > (DFS Presentation).  

[8] Vulcan Energy’s Phase One Bridging Engineering Study. These are targets and may not be achieved. Please refer to the Forward-Looking Statement disclaimer.

[9] The average forecast realised price per tonne of LHM is taking into consideration Fastmarkets long term price forecast (min 57.5% LiOH) ($/kg, EU & US) and combining it with Vulcan’s pricing concluded in offtake agreements which includes price floors and ceilings, fix prices, and price indexed on indexes like Fastmarkets.

[10] Please see assumptions on page 135