VUL Shares: Binding Offtake Agreement with Umicore Signed (ASX:VUL)

Vulcan Energy Resources Ltd [ASX:VUL] has signed a binding lithium offtake agreement with Umicore.

Umicore is a leader in cathode materials production used in lithium-ion batteries for electrified transportation.

Highlighting the importance of securing forward sales to derisk the heavy upfront costs of project development, the announcement saw Vulcan Energy Resources Ltd [ASX:VUL] share price rise 8%, currently trading at $12.50 per share.

ASX VUL - Vulcan Energy Share Price ChartSource: Tradingview.com

Vulcan, finding itself at the confluence of two megatrends —  lithium and ESG investing —  is one of the top ASX performers.

Over the last 12 months, the lithium stock gained 975%.

Now, let’s take a closer look at the Umicore deal.

VUL and Umicore sign binding lithium offtake agreement

Vulcan Energy and Umicore have signed a binding lithium hydroxide offtake agreement as part of VUL’s Zero Carbon Lithium Project.

Umicore is a global materials tech company, having generated €3.2 billion in revenues in 2020. As of September, Umicore trades with a market cap of €12.3 billion.

Importantly, Vulcan was quick to note Umicore has built the first cathode materials plant in Europe, located in Nysa, Poland.

Production at this plant is slated for the end of 2021, targeted at electric vehicle battery cell makers.

Like Vulcan, Umicore has a net zero target, with the company setting a net zero emission greenhouse gas goal by 2035.

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Terms of the offtake

VUL’s binding agreement with Umicore is for an initial five-year term.

The start of commercial delivery is set for 2025 with Umicore set to purchase a minimum of 28,000 tonnes and a maximum of 42,000 tonnes of battery grade lithium hydroxide.

Pricing will be based on market prices on a take-or-pay basis.

Vulcan’s Managing Director Francis Wedin commented:

Umicore, a leading cathode manufacturer and the first in Europe, will be a valuable offtake partner for Vulcan, as a direct consumer of Vulcan’s lithium hydroxide products.

With our recent announcements of agreements with LG Energy Solution and Renault Group, we now have a diversified mix of off takers from the cathode, battery and automotive sectors, with further agreements expected in the near term.

Importantly, Umicore also shares our ambition to decarbonize the battery supply chain in Europe, by building a carbon neutral cathode plant in Poland.

Vulcan Energy Share Price Outlook

After a hot streak that saw VUL shares reach an all-time high of $16.65 early this year, the stock has cooled somewhat.

For instance, Vulcan shares are down 17% in the last month.

Bullish investors might be thinking today’s offtake can reignite the buying activity once more.

Today’s offtake agreement with Umicore adds to VUL’s existing deals with LG Energy Solution (the world’s largest producer of lithium-ion batteries for EVs), and Renault Group (the leading European automaker pivoting to EVs).

The deal with LG Energy has a five-year initial term for 10,000tpa of battery-grade lithium hydroxide. The start of commercial delivery is penciled in for 2025.

The Renault offtake, too, has a five-year initial term, this time for 6,000 to 17,000tpa of battery-grade lithium chemicals. Delivery is slated for 2026.

Today’s agreement with Umicore represents 20% of Vulcan’s current planned output.

Project TimelineSource: Company presentation

The giddy excitement over the upcoming EV revolution is heating up the ASX lithium industry.

But not all lithium stocks are set to succeed. Especially in the resources sector, not all stocks are created equal.

So if you want extra information on evaluating and comparing lithium miners, I suggest reading our lithium guide released last week.

It’s thorough and takes you through vital factors to consider when pondering the lithium sector.

Additionally, if you’re inclined to read a report analysing a few ASX lithium stocks, check out Money Morning’s report on three exciting lithium miners.

Regards,

Kiryll Prakapenka,

For Money Morning

PS: How to Find Promising Energy Stocks — Discover why the energy market is ripe for massive disruption and how to identify innovative energy stocks. Click here to learn more.


Kiryll Prakapenka is an investing autodidact who is passionate about conducting in-depth research on investments. Kiryll brings sound analytical skills to his work, courtesy of his Philosophy degree from The University of Melbourne. A student of legendary investors and their strategies, Kiryll likes to synthesise macroeconomic narratives with a keen understanding of the fundamentals behind companies.


Money Morning Australia