Vulcan Energy Resources Limited

VUL Details

Business Update: Vulcan Energy Resources Limited (ASX: VUL) is engaged in the business of exploration of energy metals. As per a recent update, the company’s director Annie Liu has undergone a change of interest in the company and has acquired 22,080 ordinary shares.

Recent Updates:

• The company has appointed Markus Ritzauer as the CFO of VUL’s German operations, effective from 1 September 2021. The management believes that Markus’s expertise will help the company to grow and accelerate its dual chemicals and renewable energy development in the Zero Carbon Lithium Project in Germany.
• As per a recent update, the company has been granted a new exploration license for geothermal energy, geothermal heat, brine and lithium in Upper Rhipe Valley for a period of three years.

March 2021 Quarterly Update:

During the period, Zero Carbon Lithium Project’s Pre-Feasibility Study has demonstrated decent potential to develop a cutting-edge project in the centre of Europe. It reported a positive post-tax NPV of €2.25 billion for the full project. It has also completed ~$120 million in placement during the period, with decent support from ESG-focused institutions. The cash position stood at ~$117.42 million as of 31 March 2021.

Trend in Cash Position (Source: Analysis by Kalkine Group)

Key Risks: The company’s line of business makes it dependent on the underlying commodity prices, and any changes to it might impact the profitability of the company. 

Outlook: The company has decided to commence its Definitive Feasibility Study in its combined renewable energy and lithium battery chemicals project in Germany. In this regard, it has appointed Hatch Ltd. and GLJ Ltd. as consultants for the project and will be liaising with the company's in-house teams to execute on the DFS.

Stock Recommendation:  As per ASX, the stock of VUL is trading above its average 52-weeks’ price band of $0.445-$14.200. The stock of VUL gave a positive return of ~679.66% in the past nine months and a positive return of ~84.36% in the past six months. It has a support level of $8.03 and resistance level of $10.20. Considering the current high trading levels, recent rally in the stock price, negative ROE performance and the key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $10.12 (as on 15 July 2021, 10:50 AM (GMT+10), Sydney, Eastern Australia).

VUL Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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