Shares in Vulcan Energy (VUL ASX) are up a whopping 2,500% in the last twelve months, so we take a look at this lithium producer and see Should I Buy Vulcan Energy Shares (VUL ASX)?

Should I Buy Vulcan Energy Share Price

Shares in Vulcan Energy (VUL ASX) started the year trading at around $0.52 per share but over the last twelve months have exploded to trade at new 52-week highs of $15.34. This has been one of the best performing shares on the ASX this year with an impressive one-year performance up 2,500%.

The 5-year performance of the share is also equally impressive, with the price being up +5,746%.

Vulcan Energy Share Price$14.89 / share
Vulcan Energy Market Cap$1.6 Billion
52 Week Range$0.52 – $15.34
VUL ASX 1 Year Performance+2,500%
VUL ASX 5-Year Performance+5,746%
Vulcan Energy Share Price Information

Should I Buy Vulcan Shares: About

Vulcan is aiming to become the world’s first lithium producer with net-zero greenhouse gas emissions. Its ZERO CARBON LITHIUM™ Project intends to produce a battery-quality lithium hydroxide chemical product from its combined geothermal energy and lithium resource, which is Europe’s largest lithium resource, in Germany.

Vulcan Energy and their subsidiary company Kuniko are destined to produce zero-carbon lithium and other battery metals such as Copper, Nickel and Cobolt. The company sees electric vehicles and the massive increase in government incentives to increase the uptake of EV’s as a massive opportunity for the company.

In June, the Company announced the lodgement of the Kuniko Limited IPO Prospectus to raise $7,886,213 (before costs) to form a new standalone ‘Zero Carbon Copper, Nickel, Cobalt’ company. The spin-off of the Scandinavian projects enables the Company to be fully focused on the development of its core Zero Carbon Lithium™ combined renewable energy and lithium chemicals Project in Germany.

The approximate potential emissions in the UK from producing and refining lithium from hard-rock mines is estimated at about 1 Billion Tonnes. This is more than the CO2 emissions of UK, France and Italy combined.

Currently Zero Local Supply of LIOH in EU

Vulcan draws on naturally occurring, renewable geothermal energy to power the
lithium extraction process and creates a renewable energy byproduct. This uses no fossil fuels, requires very little water and has a tiny land footprint.

From Vulcan’s Investor Presentation they provide a comparison of the CO2 emissions, water usage and land usage of their intended procession plant vs traditional hard-rock processing of lithium.

VUL ASX, Should I Buy Vulcan Shares?
Vulcan Sustainability Metrics Vs Traditional Supply (Hardrock and Evaporation Ponds)

Vulcan Energy is a favourite amongst current ESG investment portfolio’s.

Should I Buy VUL ASX: Investor Sentiment

Vulcan has one of the highest buy ratings of any of the Prophet Should I Buy articles that we have completed. The Investor sentiment towards is extremely bullish at the current share price.

Investor Sentiment Vulcan Energy (VUL Shares)

Vulcan Energy Fundamentals

Vulcan Energy is a small-cap company with a total market capitalization of just over $1.6 Billion. This places it as the 228th largest listed ASX company by market cap.

For a company of this size, we would expect risk to start to reduce as revenues and profits are starting to be realised. Because small caps don’t tend to be as established as mid to large-cap companies, they generally involve a higher level of risk.

Last (Price)$14.89
VUL Market Cap$1,641,175,015
Sector Basic Materials (Lithium)
EPS-$0.116
Price / EarningsN/A
Volume (4w avg)1,881,897
ASX Rank228 of 2,296
Price to Sales$0.00
Price to Book Ratio98.81x
Vulcan Energy Fundamentals

The price to book ratio of Vulcan Energy is significant meaning that for a share of VUL ASX you get very little assets on the books. Vulcan is not yet profitable and hence does not have a PE ratio, the EPS is also negative.

The company also has a price to sales ratio of 0 as Vulcan Energy shares are yet to generate any revenue.

As the company is pre-revenue and is yet to make a profit, we cannot value this company using traditional means. Instead, we would need to look at the future potential and potential cash flows of the company in order to form an assessment.

Vulcan Energy Quarterly and Activities Report

The last Quarterly report issued to the market was released on June 30th 2021. The company lists no receipts from customers and is pre-revenue.

Vulcan Energy (VUL ASX) Cash Flows from Quarter Ended 31 March 2021

The company does have $117million dollars of cash and cash equivalents at the end of the applicable 31 March 2021 Quarter.

Cash and Cash Equivalents 31 March 2021

Vulcan Energy (VUL ASX) as they are pre-revenue seem to fund the majority of their operations through capital measures such as Share Placements and Equity Raisings. The company’s expenditure as per the quarterly reports is quite low as a percentage of their market capitalisation as compared to other small to mid-cap companies.

ENERGY BUSINESS

Vulcan is targeting dual sources of income from both the sale of the largest lithium resources in Europe and by selling power directly back into the grid. Part of the energy that is being generated will be directed to the lithium extraction process with the excess being sent back into the electricity grid.

Vulcan Energy Process Overview

Vulcan is also expected to be able to generate a source of income through the sale of carbon credits.

In our opinion, It seems the company is expecting to fund their operations by further capital measures such as placements, raisings or bank debt.

LITHIUM BUSINESS

The lithium business has already significant interest from major automakers in Europe with an agreement with Renault and LG already in place.

Renault Group and Vulcan Energy announce a five-year strategic partnership within the Zero Carbon Lithium™ Project, securing between 6,000 and 17,000 metric tonnes per year of battery-grade lithium chemicals.

The first of which deliveries for Renault are due to commence in FY2026 and run for a period of 5-years. The deal with LG also has similar properties, running for a 5-year period with first orders expected in FY2025.

LGES to purchase 5,000 metric tonnes of battery-grade lithium hydroxide for the first year of the supply term, ramping up to 10,000 metric tonnes per year during the second and subsequent years of the supply term.

In total between LG and Renault, there is already supply agreements in place for over ~20,000 metric tonnes of lithium

VUL ASX Insider Ownership and Trading

It’s always great to see directors and insiders buying on market but sometimes they don’t always get the timing exactly right. For example, Francis Wedin gave up nearly $13 per share by selling 2.5million shares back in January 2021 at $1.10.

The most recent insider transactions have been as high as 6.50 and 8.26 buy Gavin Rezos and Josephine Bush. Since then the share price has continued to increase.

DateValueNameSharesMax Price
30 Jun 21+$249,996Gavin Rezos38,461AU$6.50
03 May 21+$34,803Josephine Bush4,214AU$8.26
15 Jan 21-$929,911John Hancock22,421AU$41.48
15 Jan 21+$4,314,742John Hancock5,121,221AU$0.84
15 Jan 21-$2,749,998Francis Wedin2,500,000AU$1.10
Recent Insider Transactions for Vulcan Energy

Vulcan Energy Ownership Breakdown

Shares of VUL ASX are primarily owned by the general public and individual insiders with ~62.6% and ~23.9% respectively. This is a large ownership stake by the general public and at a 1.4billion market cap, we may potentially start to see institutions starting to buy into the stock, due to entry into ASX indices.

Ownership Breakdown of VUL Shares
Ownership Breakdown of VUL Shares

The stock also has extremely notable investors onboard such as Bianca, John and Gina Reinhardt who own 6.74, 5 and 6.74% of the shares on issue respectively. The MD Francis also holds a significant portion of shares which is good to see from a managing director.

NameLast NoticeTotal SharesShares Held (%)
Francis Edward Barnabas Wedin23/09/202011,163,33415.76
Francis Wedin11/02/202113,005,83412.10
Bianca Hope Rinehart11/02/20217,241,2006.74
John Langley Hancock30/06/20215,385,1355.00
Georgina Hope Rinehart11/02/20217,241,2006.74
Vivien Enterprises Pte Ltd11/02/20216,030,2075.61
Substantial Holdings in Vulcan Energy Shares

Should I Buy Vulcan Energy Shares: Prophet’s Take

Whilst the company is pre-revenue they never seem to have any trouble raising capital from investors to fund operations.

Although the project looks very promising we still see significant execution risk in Vulcan performing. However, the company has the likes of big-name players such as three of the Hancock family whom I’m sure have done their due diligence on this stock.

There seems to be quite a bullish sentiment towards the lithium sector as a whole at the current time. Although Vulcan Energy seems to be on the right track, we will be staying away from VUL ASX at the current time.

While the upside here is likely substantial if the company can pull off what they are planning we believe the risk is also high. The company is working hard to secure agreements to reduce this risk for investors, and have already secured a number of agreements notably with LG and Renault.

We are bullish on the Electric Vehicle and Battery Sector as a whole.

However whilst there seems to be a lot in store for this stock. We will likely miss this opportunity and will instead watch this play out from the sidelines. This stock we find extremely interesting has some big-name player on board and we look forward to seeing what the future hold for VUL.

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