Vulcan Energy has received a non-binding letter of support from Australia’s export credit agency, Export Finance Australia (EFA) for up to $200m to back its unique geothermal lithium brine project in Germany. Vulcan will use the letter of support to help finance phase one of its Zero Carbon Lithium project, where geothermal energy will be used in the lithium extraction process and also spun off for domestic heating or converted to grid electricity.
Vulcan’s project represents the largest lithium resource in Europe and according to management is large enough to provide enough lithium hydroxide to power 1 million electric vehicles year. It is centred on Germany’s Upper Rhine Valley Brine Field (URVBF).
Export Finance Australia is part of the Federal Government’s move to support Australian businesses that are doing business overseas. It provides funding for those businesses with a view to ensuring they are competitive in international markets.
Noting the deepening relationship between Australia and the EU as part of the international push to develop and secure global supply chains for clean energy critical minerals, it is encouraging that we have secured substantial in principle financing support from government-backed export credit agencies (ECAs) both in Europe and in Australia. EFA’s Letter of Support is encouraging and follows our successful market sounding conducted in the last few months, which has seen strong commercial and development bank support, as well as substantial in-principle ECA support for Phase One. This signal of confidence is timely and strengthens our position as we enter our project-level debt and equity financing for Phase One of the Zero Carbon Lithium Project in November. Vulcan Energy managing director and chief executive officer Cris Moreno
The upstream area for phase one of the project comprises three licences in the Lionheart district from which lithium chloride will be transported to the Central Lithium Plant (CLP) at Vulcan’s downstream lithium chemicals production site at the Höchst Chemical Park near Frankfurt, where Vulcan has secured exclusive access.
Vulcan plans to develop the licence areas in a phased approach. Phase one will be developed first, followed by future phases which will be developments of similar size, stepping out to both the north and south.
Vulcan holds a 100 per cent interest in the operating Insheim license in the upstream phase one district. This includes the operational geothermal wells and plant.
It is also concluding negotiations to supply the city of Landau with renewable heat as part of phase one, underlining the unique nature of its lithium brine that exists in a geothermal setting.
Founded in 2018, Vulcan’s Zero Carbon Lithium project aims to decarbonise lithium production by developing the world’s first net carbon neutral lithium business, by large-scale co-production of renewable geothermal energy alongside the production of lithium.
The company’s goal is to sustainably deliver a local lithium source for Europe, built around a net zero carbon production strategy which excludes fossil fuels, through the adaptation of existing technologies to efficiently extract lithium from geothermal brine.
The EFA’s signal of confidence follows Vulcan’s successful market-sounding conducted in the last few months. The company says it has already seen strong commercial and development bank support, in addition to substantial in-principal phase one export credit agency (ECA) support already from France, Canada, and Italy.
The company says its phase one project level debt and strategic equity financing is formally due to commence in mid-November, after completion of a bridging study, adding that the start of phase one financing is also timed to mesh with public funding applications in Germany.
The EFA’s letter of support can also be converted into a binding agreement following financing terms being met, which could possibly include a confirmed level of Australian content such as legal, technical, market and environmental due diligence reports and acceptable loan and other contracts being in place.
Vulcan is also engaging closely with the German government, which has signed a joint “Declaration of Intent” to work together to develop critical minerals value chains. Notably, the French and Australian governments did the same at the end of September.
In addition to the phase one group of licences, Vulcan also holds 13 licences in the URVBF, for a total secured licence area of 1,745 square kilometres.
In an interesting contrast to the better-known major sources of lithium-rich brines from continental evaporative salar brines in South America and China, Vulcan’s URBVF resource represents a unique source of not only lithium but also a significant repository of geothermal energy which can potentially be exploited directly in the lithium production process or spun off to other external needs as electrical or thermal energy.
The net result of making use of in-house power is that Vulcan’s financial studies show some off-the-chart numbers.
The URVBF has a long history of deep well development, with many wells being developed for either hydrocarbon potential or geothermal potential.
However, many of the wells historically put into the URVBF have been shallower, mostly for oil and gas production, while notable geothermal work includes R&D projects at Bruchsal, Germany and in Soultz, France, where much deeper geothermal wells have tested various geothermal power generation technologies.
Vulcan’s operation will be ground-breaking for a few reasons when fully operational. The mix of both geothermal power and lithium will provide an interesting window into just how much money you can make when you don’t have to pay for power at a lithium brine operation.
Of equal importance is Vulcan’s plan to do away with traditional brine evaporation ponds that can be costly and environmentally tricky. Vulcan is planning to employ “direct lithium extraction” technology and whilst it is somewhat new, it is not completely new and has been working effectively in China.
All of which makes for a fascinating financial study that the more economically literate will no doubt delight in holding up against the more traditional lithium brine operations for comparative purposes.
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