Vulcan Energy has secured a $2.6 billion financing package to build Europe’s largest lithium production project, which is expected to generate enough material for about half a million electric vehicle batteries annually.
The lithium explorer said funding for the first phase of the Lionheart project in Germany, the start of production of which was twice delayed, paves the way for work to begin this week.
Lithium projects around the world have faced delays due to the collapse in prices for the metal used in batteries, which has affected investor confidence and the willingness of buyers such as car manufacturers to enter into long-term contracts.
During its first decade of production, Australian-listed Vulcan, backed by mining magnate Gina Reinhart, aims to produce around 24,000 tonnes of lithium hydroxide a year, enough for around 500,000 electric car batteries.
The company will supply lithium from the project to companies including carmaker Stellantis, materials technology group Umicore and commodities giant Glencore, as Western countries race to diversify supplies of the vital mineral currently reliant on China.
Vulkan told the Financial Times this year that the sales contracts have a “mix of pricing mechanisms” and terms ranging from five to 10 years.
The package – backed by European and German government agencies, the European Investment Bank, five export credit agencies and seven commercial banks – combines debt, government subsidies, equity investments and raising funds by issuing shares, the company said.
As part of the financing package, Vulcan plans to raise up to €603 million of equity, at a fixed price of €2.24 per share.
“The board of directors has approved the final investment decision, everything is funded and we will start drilling on Friday (5),” CEO Francis Weeden told Reuters.
Vulcan had initially said that its project, which has been marked by repeated delays, would begin producing lithium in 2023, a date that was later postponed to 2025. Now, the company hopes to begin production in 2028.
This year, Vulcan ended its old supply contract with carmaker Renault to “make” some materials available to other buyers. Stellantis is a major buyer, as well as one of Vulcan’s largest shareholders.
About 90% of the lithium the company produced in the first 10 years has already been contracted, with most sales at a fixed price or with a “floor” or “ceiling” on the price, according to Vulcan documents.
The price of lithium carbonate was trading at just under $10,000 per ton at the end of October, down from more than $70,000 per ton in 2023, according to Benchmark Mineral Intelligence.