Vulcan Energy Secures Major Funding Milestone for Flagship Lithium Project

Vulcan Energy AU0000066086

Vulcan Energy Resources has taken a decisive step toward realizing its ambitious Lionheart lithium and geothermal energy project in Germany. Following the arrangement of a multi-billion euro financing package, the company is now bolstering its equity base through a substantial capital raise, a move that involves significant dilution for current shareholders. The central question for investors is whether this financial foundation will be sufficient to deliver the complex project on schedule.

The cornerstone of Vulcan's progress is the secured €2.2 billion in funding for Phase One of the Lionheart operation in the Upper Rhine Valley. This comprehensive package features support from a diverse consortium:

• Banking Consortium: Twelve international financial institutions, including ABN AMRO, BNP Paribas, ING, Natixis, and UniCredit.
• Export Credit Agencies: Backing from agencies in France (Bpifrance), Canada (Export Development Canada), Australia (Export Finance Australia), Denmark (EIFO), and Italy (SACE).
• Public Grants: €204 million in non-repayable grants from the German government.
• Strategic & Institutional Investors: Equity participation from the KfW raw materials fund, Siemens, HOCHTIEF, and the Demeter Climate Infrastructure Fund.

A notable component is a €250 million loan from the European Investment Bank (EIB), provided under its Critical Raw Materials Strategic Initiative. EIB Vice President Nicola Beer highlighted the project's pioneering nature, calling Lionheart "Europe's first project to combine Direct Lithium Extraction with renewable energy generation," thereby setting a new benchmark for sustainable lithium production.

Construction officially commenced on December 9, marking the project's transition from development to execution.

Substantial Equity Raise Underway

To complement the debt financing, Vulcan is executing a large-scale equity offering. The company confirmed on December 11 the placement of over 61 million new, fully paid ordinary shares at A$4.00 each to institutional investors. This forms part of a larger capital initiative announced on December 3, comprising two elements:

1. An institutional placement.
2. A non-renounceable entitlement offer for retail shareholders on a 1-for-1.128 basis.

The institutional segment involves approximately 178 million new shares in total, aiming to raise roughly €398 million (A$710 million). The placement was settled on December 10, with trading of the new shares beginning on December 12.

Concurrently, the retail entitlement offer for eligible shareholders in Australia and New Zealand opened on December 10, also priced at A$4.00 per share. Shareholders have until December 23 to exercise their rights in full, in part, or not at all, with the ability to apply for up to 100% more shares than their entitlement. Shifts in the share registry are already evident, with a substantial shareholder notice filed with the ASX on December 11.

Despite the long-term strategic story, Vulcan's share price has faced pressure, declining approximately 40% over the past 30 days and trading below its key moving averages.

Strategic Role in Europe's Battery Ambitions

The Lionheart project is central to Europe's goals for battery supply chain independence. It is based on the continent's largest known lithium resource by lithium carbonate equivalent. Vulcan will employ its proprietary VULSORB® technology to extract lithium from naturally heated geothermal brines while co-generating renewable heat and power, targeting carbon-neutral operations.

The company estimates the project could supply up to 12% of Europe's anticipated lithium hydroxide demand by 2030, directly supporting the objectives of the EU Critical Raw Materials Act to reduce import reliance.

Vulcan has already secured key customer offtake agreements, providing sales-side predictability:
* Long-term supply contracts with industrial customers.
* A supply agreement with Glencore, announced in October 2025.
* Existing partnerships with Stellantis covering both lithium supply and geothermal projects.

Governance and Project Timeline

Vulcan has called an Extraordinary General Meeting for January 12, 2026. Shareholders will be asked to:
* Ratify the shares already issued under the institutional placement.
* Approve the issue of conditional placement shares to HOCHTIEF.

In return, HOCHTIEF gains the right to appoint a member to Vulcan's board for as long as it maintains a minimum 10% shareholding.

Operationally, Vulcan anticipates a roughly two-and-a-half-year construction period for the first commercial phase. Commercial lithium hydroxide production is targeted for the second half of 2028. The core technology has been validated at the Lithium Extraction Optimisation Plant (LEOP), which has been producing high-purity lithium chloride since April 2024.

With the retail offer closing on December 23, the January shareholder meeting, and construction now underway, the path is set. The coming years will determine if Vulcan can fulfill its planned role as a cornerstone European lithium supplier.