Why the Vulcan Energy (ASX:VUL) share price is up 4,000% in 12 months

The Vulcan Energy Resources Ltd (ASX: VUL) share price has continued its impressive run and is zooming higher again on Monday.

At one stage today, the lithium-focused mineral exploration company’s shares were up as much as 24% to a record high of $7.97.

When the Vulcan Energy share price hit that level, it meant it was up a staggering 4,200% since this time last year.

What is Vulcan Energy Resources?

Vulcan refers to itself as the first Zero Carbon Lithium producer. It is aiming to produce a battery-quality lithium hydroxide chemical product with net zero carbon footprint from its combined geothermal and lithium resource.

This is Europe’s largest lithium resource, located in the Upper Rhine Valley of Germany.

The company plans to use its unique Zero Carbon Lithium process to produce both renewable geothermal energy, and lithium hydroxide, from the same deep brine source.

In doing so, management notes that it will be addressing EU market requirements for lithium by reducing the high carbon and water footprint of production, and total reliance on imports, mostly from China.

The company is aiming to supply the lithium-ion battery and electric vehicle market in Europe, which is the fastest growing in the world. It believes its resource can satisfy Europe’s needs for the electric vehicle transition, from a zero-carbon source, for many years to come.

Why is the Vulcan Energy share price rocketing higher?

The catalyst for the impressive Vulcan Energy share price gain has been the release of its Pre Feasibility Study (PFS) this month.

According to the release, the Zero Carbon Lithium Project’s first PFS demonstrates strong potential to develop a cutting edge, combined renewable energy and lithium hydroxide project, in the centre of Europe, with net zero carbon footprint.

The study also reveals that the project has an after tax net asset value of 2.25 billion euros. This equates to approximately A$3.5 billion.

This is considerably less than its current market capitalisation of approximately $500 million. And while the company will inevitably need to raise capital to fund its development, investors appear to believe that even after factoring in the dilution, its shares are still cheap at the current level.

That’s certainly the view of German equity analysts at Der Aktionär. This month they put a 6 euro price target on the company’s Frankfurt listed shares. This compares to the current Vulcan Energy share price of 3.70 euros in Europe.

What’s next?

The company’s main focuses of 2021 will be its Definitive Feasibility Study (DFS) work at the project, permitting, lithium extraction test-work scale up, and advancing current discussions with European lithium offtakers.

And if everything goes to plan, management is aiming to have the project operational in 2024.

More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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