Vulcan Energy’s Next Move: LSC-2 Flow Test Set to Test Bullish Thesis After Stock Rout

Vulcan Energy's Lionheart project hits milestones with €2.2B financing and Stellantis deal, but shares fall 12% in a week on dilution and bearish technicals.

The story of Vulcan Energy’s Lionheart project has all the hallmarks of a breakthrough: a €2.2 billion financing package closed in May, an institutional cornerstone investor in HOCHTIEF, and 72% of future output already sold under long-term contracts. Yet the stock tells a different tale. Shares closed Friday at €2.10, shedding 12% in the past week alone and nearly 20% since the start of the year. The disconnection between project milestones and market performance has become the central tension for investors.

The immediate catalyst for the latest leg lower was a dose of dilution. On 1 June, roughly 757,000 new ordinary shares were admitted to trading on the ASX, stemming from a rights issue completed before the Lionheart financial close. The “sell-the-news” pattern that followed the closure announcement intensified, knocking the stock down almost 5% on Friday alone. With the issue now priced in, attention turns to the operational progress that could either vindicate the bulls or deepen the rout.

That progress is concentrated on the drilling program. The first production well, LSC-1, has been drilled, completed and tested with flow rates between 105 and 125 litres per second. The second well, LSC-2, has now reached a depth of 3,000 metres, with completion and a flow test expected in the current quarter. That test is the most important near-term data point for the stock. It will determine whether the geothermal reservoir delivers the productivity needed to sustain the Lionheart business case. Meanwhile, Vulcan is installing a commercial-scale electrolysis plant at Frankfurt’s Industriepark Höchst, built around its proprietary VULSORB lithium extraction technology.

The company ended the quarter with €364 million in cash — enough to reach first commercial production in 2028 without further capital raises, management says. Of the planned annual output of 24,000 tonnes of lithium hydroxide monohydrate, 72% is under fixed- or floor-price off-take agreements, including a decade-long contract with Stellantis for 128,000 tonnes. The project’s strategic importance to Europe’s battery supply chain is hard to overstate, but the stock is trading as if the risks outweigh the rewards.

Part of the market’s caution is technical. At €2.10, Vulcan Energy’s shares sit nearly 20% below the 200-day moving average of €2.61, with both the 100-day and 50-day averages above the current price. The relative strength index stands at 42.3, inching toward oversold territory without yet reaching it. The annualised 30-day volatility of over 70% underscores how violently the stock reacts to news and capital flows. The 52-week low of €1.77, set in March, remains a tangible reference point about 19% below Friday’s close.

The macro backdrop offers mixed signals. Chinese lithium carbonate prices hit a two-year high of around 200,500 yuan per tonne in mid-May, and analyst house BMI raised its average price forecast for 2026 to $17,000 per tonne. Demand is further supported by a projected 80% increase in battery storage for data centres over the next five years and by the EU Critical Raw Materials Act. The European Central Bank’s rate decision on 10-11 June is the next macro test — a cut would lower the cost of long-term infrastructure investments like Lionheart, while a hike would have the opposite effect.

Not all institutional investors are heading for the exits. State Street increased its stake to 3.17% in mid-May, shortly before the Lionheart financial close — a bet that the current weakness is a buying opportunity. The AGM at the end of May delivered strong backing for management: CEO Francis Wedin was re-elected with 94% approval, and new director Roberto Gallardo received 99%. HOCHTIEF, which invested €130 million and now holds 15.4%, has signalled its confidence in the project’s long-term viability.

What the stock needs now is a catalyst that overwhelms the dilution overhang and technical damage. The LSC-2 flow test later this quarter is the natural candidate. If it confirms the productivity of the geothermal reservoir, the bullish narrative gains a powerful anchor. If it disappoints, the 52-week low — and possibly lower levels — will come into sharp focus. Until then, the gap between project promise and market price remains the defining feature of Vulcan Energy’s story.