The Germany-based lithium project aims to produce lithium hydroxide for the EU battery sector but still has challenges to overcome.

Vulcan Energy Resources (“Vulcan Energy”) announced it would be issuing an underwritten capital raise of A$109M (US$74M) to help develop its geothermal lithium brine project in Germany. The company would issue 21,400,000 new shares at A$5.1/share (US$3.4/share).

Vulcan Energy is aiming to produce battery-grade lithium hydroxide from geothermal brine resources in the Upper Rhine Valley Brine Field in Southwest Germany. The project has attracted considerable attention and funding in the form of government grants and private investment, though it has also been subject to short selling. The company has signed future binding offtake agreements for lithium hydroxide production with Stellantis, Volkswagen, Renault Group, Umicore, and LG Energy Solutions, with Stellantis also investing AUD76M (US$51M) in the company directly.

The capital raise is Vulcan Energy’s latest attempt at financing its geothermal brine project, which it claims will produce zero-carbon energy in addition to zero-carbon lithium hydroxide, via a direct lithium extraction (DLE) flowsheet. The company has successfully commissioned a pilot plant in the Upper Rhine Valley which has produced lithium hydroxide. However, ramping up to a commercial level will require significantly more capital expenditure and presents new engineering issues which will need to be overcome.

In its latest feasibility study update, Vulcan estimated the capital cost of its project at A$1,496M (US$1,006M), making it one of the more capital-intensive lithium projects currently in development in terms of CAPEX per tonnes lithium hydroxide capacity. The lithium sector has seen several proposed lithium projects utilising DLE flowsheets run into technical issues as the projects attempt to ramp up. These have been in the form of capital cost blowouts, lithium products not meeting industry specifications, or operating costs failing to achieve desired thresholds. While risks remain for all projects reliant on DLE technologies, the increasing importance of ESG credentials in battery metal supply chains provides an attractive perspective for geothermal lithium operations, one which Vulcan Energy is banking on to garner funding. With ESG being a new metric of project viability; the EU investing heavily in battery manufacturing capacity, and lithium hydroxide prices forecast to remain above US$20,000/t over the next decade, Vulcan Energy is in a favourable position to service the future European battery sector. However, the project still has engineering issues to overcome to achieve commercial production.