Vulcan Energy’s Lionheart lithium and renewables project roars to life in Germany with $4b funding deal

A global rush to hoard critical mineral supplies has helped Gina Rinehart-backed Vulcan Energy Resources clinch $3.9 billion in a mammoth funding effort to start building one of the only lithium mines in Europe. The listed Perth-based junior is looking to raise almost €528m ($1 billion) from its biggest backers in a capital raising launched Tuesday, has loaded up on over €1.3 billion ($2.1b) in debt, and netted €487m ($861.5m) in Government grants and equity investments. After years of pulling the funding together Vulcan plans to start construction at project Lionheart, located in Germany’s Upper Rhine Valley, in the coming days. First commercial production of lithium hydroxide monohydrate is targeted for 2028 and will be sold to offtake customers LG Energy Solutions, Umicore, car giant Stellantis and Glencore for the first decade of operations. Lionheart will have the capacity to produce 24,000 tonnes of LHM, which it says is enough for 500,000 electric vehicles a year — as well as 275 gigawatt hours of power and 560GWh of heat. It’s taken nearly two years to secure the funding. Company founder and executive chair Francis Wedin said the process was “harder than anything I could ever imagine from an endurance perspective.” But he said a growing sense of urgency in Europe to build its own raw material supplies had been “turbocharged”, even as recently as the past months. “I think the recent restrictions that China has been putting in place in that critical raw material space has really woken people up in the last few months,” he told The West Australian. “Obviously, the US has been making some big moves as well to respond, and the EU has been obviously, discussing the problem for a long time now… but what you’re seeing now is really the rubber really hitting the road.” Vulcan’s proposal to pump lithium-rich brine up through underground wells and then use the heat form that brine as a geothermal energy source to make Lionheart a zero-carbon project has often been prefixed as “ambitious”. The operations differ from the more straightforward hard rock mining of spodumene concentrate done in Western Australia. A lithium hydroxide product like the one set to be extracted by Vulcan typically fetches a higher price tag of over $US10,000 a tonne. Mr Wedin, who is the largest individual shareholder in Vulcan with just over 7 per cent, said the company had already “proven out the technical side”. Its first batch of the refined lithium met product purity specifications in January. “There’s a certain breed of people . . . who just want to sit on the sidelines and be cynical. And typically those people, I think, miss key trends in the industry,” he said. Sedgman and Hochtief have been contracted for joint engineering, procurement and construction services. The build will include geothermal-lithium brine production wells, substation and pipelines and a renewable power and heat plant that will supply local consumers over a 30-year project life. A plant to extract lithium from brine will also be built, along with a plant to convert the brine into battery-quality lithium hydroxide monohydrate. According to Vulcan’s latest annual report, Mrs Rinehart owns about 6.5 per cent of the company through her Hancock Prospecting empire. The group first invested in Vulcan nearly five years ago. Mr Wedin declined to say whether Hancock Prospecting had taken up its full entitlement in the raising, but acknowledged the Rinehart-controlled company been “supportive”. The $1.08b equity raising priced at substantially discounted €2.24 ($4) a share will comprise a $245m institutional placement, a one-for-1.128 institutional rights offer for $465m and a $366m one-for-1.128 retail rights offer. Vulcan shares last changed hands at $6.13. The phase one finance deal includes $2.12b in senior debt funding from a syndicate of 13 financial institutions comprising the European Investment Bank, five export credit agencies and seven commercial banks — including ABN AMRO, BNP Paribas and ING — and a $364m grant from the German government. Export Finance Australia is contributing $214m while EPC joint venture partner Hochtief will also tip in $268m via a strategic 14 per cent stake in a local Vulcan subsidiary in Germany. Vulcan is targeting annual average revenue of €566m and an pre-tax earnings margin of 75 per cent.