Vulcan Energy Resources has slashed capex costs for its Zero Carbon Lithium project in Germany by some $168 million, while maintaining an expected annual EBITDA of about $873 million, despite lithium hydroxide monohydrate (LHM) prices having more than halved this year.
In a bridging engineering study released today, the company also outlines an operation expenditure (opex) cut down to $6739 per tonne of LHM, which it says is one of the lowest figures on the industry’s cost curve.
Although prices have recently slumped from highs of about $139,000 a tonne, the current mark of about $30,000 a tonne still represents significant upside, especially considering the major cost cuts.
The study also shows how Vulcan is now streamlining into one core production area that is already commercially producing brine, with increased lithium reserves. It confirms a pre-tax net present value of about $6.5 billion pre-tax, an annual revenues target of $1.18 billion and a four-year payback period.
It comes as the company creeps closer to kicking off its phase-one development of the project, which integrates renewable geothermal energy with the production of lithium hydroxide – a precursor commodity in lithium batteries for electric vehicles (EVs) and large, fixed power storage batteries. Management is also now set to launch project-level debt and strategic equity financing, with backing headed up by global financial giant BNP Paribas.
The bridging study for phase-one encompasses two key aspects.
Firstly, it is to meet the European Union’s (EU) critical raw materials demand with a target of 24,000 tonnes of lithium hydroxide per annum. That is estimated to be equivalent to 500,000 battery EVs per year.
Secondly, it is to provide affordable, base-load renewable energy in tandem with local employment opportunities for heating and electric power. It targets up to 560 gigawatt hours per annum (GWh/a) of baseload renewable heating for local community commercial and domestic applications and up to 275 GWh/a baseload power to be sold into the local grid.
The significant efforts by the Vulcan team to produce such a robust Bridging Study are commended. It 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. Vulcan Energy Resources managing director and chief executive officer Cris Moreno.
Mr Moreno also said the company would formally open its lithium extraction optimisation plant next week. Once in production, it will represent Europe’s first tonnes of domestically produced lithium chemicals.
The bridging study confirms that Vulcan’s project is “execution-ready” and it is poised to begin awarding key engineering, procurement, construction and management contracts.
Management says tens of thousands of hours of in-house adsorption-type direct lithium extraction (A-DLE) pilot work has been completed, showing better than 90 per cent lithium recoveries. The technique was invented in the 1970s and has been used commercially since 1996.
Recently, with the rapid growth of the lithium market and an increasing focus on the sustainability of supply and the carbon footprint of production for EVs, there has been an exponential increase in the number of A-DLE projects entering production and the construction phase.
Vulcan says it has been using its proprietary adsorbent, “VULSORB”, which has shown a high performance relative to “off-the-shelf” products and thousands of cycles of sorbent life with no loss of capacity, reducing the estimated opex.
The company says its optimisation plants have been designed to begin sending product to potential off-take companies and the start of financing will be timed to mesh with public funding applications in Germany.
Late last month, Vulcan received a non-binding letter of support from Australia’s export credit agency, Export Finance Australia for up to $200m to back the project. It will use it to help finance phase one, which will also be bolstered by strong commercial and development bank support and substantial in-principal export credit agency backing from France, Canada, and Italy.
Once the funding for Vulcan’s unique project can be put away, it will be well ahead of most – if not all – of its the competition for the timely provision of “green” energy from two local natural resources to a continent hit hard by the loss of a significant part of its nuclear, gas and coal supplies.
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