Vulcan Energy (ASX: VUL) Secures €2.2 Billion for Europe’s First Domestic Lithium Supply Chain

Vulcan Energy Resources (ASX: VUL) has secured a landmark €2.2 billion (A$3.9 billion) financing package to fully fund Phase One of its Lionheart lithium and renewable energy project in Germany. The announcement triggered a trading halt and enabled the board to make a Final Investment Decision, with construction scheduled to begin this Friday. This marks the most significant milestone in Vulcan’s history, transforming it from a development-stage company into an execution-phase operator, with first production targeted for 2028. The financing also positions Vulcan to deliver Europe’s first fully integrated domestic lithium supply chain at a time when the region is working to reduce its dependence on Chinese battery materials.

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Big Institutions Back Vulcan’s Project

What makes this funding remarkable is not only its size, but the calibre of institutions behind it. The European Investment Bank is leading a group of 13 lenders that together are giving €1.185 billion in senior debt. Germany’s state-owned bank KfW is putting in €150 million for a 14% stake in Vulcan’s German arm. A group made up of HOCHTIEF, Siemens Financial Services, and Demeter is adding €133 million for a 15% stake in the project company.

This strong backing shows that Europe’s biggest institutions see Vulcan’s Lionheart project as vital for energy security, not just another lithium mine. To finish the funding package, Vulcan is also raising €528 million by selling new shares at A$4.00 each. Since the shares were trading at A$6.13 before the halt, this 35% discount means existing shareholders will be diluted. Even so, securing full funding for construction removes the biggest risk that has been holding back Vulcan’s value. Many lithium developers struggle to raise money when markets are weak, so closing this deal is a major win.

Lionheart Delivers Lithium and Renewable Energy From a Single Source

Phase One will produce 24,000 tonnes of lithium hydroxide annually, enough to supply around 500,000 electric vehicle batteries per year. But what makes Vulcan’s approach different is the dual revenue stream. The project will also generate 275 GWh of renewable electricity and 560 GWh of heat annually over its estimated 30-year operating life.

Vulcan uses its own VULSORB technology to extract lithium directly from geothermal brines, avoiding the big evaporation ponds used in traditional methods. This process has a much lower carbon footprint and has earned the project a “Dark Green” rating from S&P Global, the highest ever given to a mining company.
This environmental edge also makes business sense. Vulcan has signed 10-year supply deals with Stellantis, LG, Umicore, and Glencore. About 72% of these contracts include fixed or minimum prices, giving Vulcan protection if lithium prices stay weak during construction.

The Investor’s Takeaway for Vulcan Energy

The Lionheart project looks financially strong on paper. It is expected to deliver average annual earnings (EBITDA) of €427 million at a 75% margin, with a post-tax value (NPV) of €1,152 million and an internal rate of return (IRR) of 16.6%. Gina Rinehart’s Hancock Prospecting, which owned 6.49% before the capital raising, continues to back Vulcan, a signal of confidence from Australia’s wealthiest mining investor.

Key points for investors:

• Opportunity: Construction is fully funded, offtake deals are in place with major partners, pricing is partly protected, and the project has strong ESG credentials, all aligning with Europe’s growing EV demand.
• Risk: Shareholders face dilution, construction will take 2.5 years, and scaling up new technology for commercial production carries challenges.
• What to watch: Progress on construction, any cost overruns, and how retail investors take part in the entitlement offer.

For those who believe Europe needs its own lithium supply, the discounted share placement could be an appealing entry point. Still, patience will be essential, as the real test of Vulcan’s investment case won’t come until production begins in 2028.