vulcan energy (ASX:VUL) announced a $164 million institutional investment and $20 million share purchase plan (SPP) to fund key aspects of its Lionheart project in Germany’s Upper Rhine Valley saline fields.

The company aims to become the world’s first carbon-neutral, integrated lithium and renewable energy producer.

The offering will raise $121 million from institutional investors and $43 million from strategic investors, with SPP offering existing shareholders the opportunity to participate at the same offering price. The issue price of $5.85 per share represents an 11.9% discount to Vulcan’s last traded price of $6.64.

The SPP will terminate on January 20, 2025 and the shares under the SPP will be issued on January 28, 2025.

About Vulcan and Lionheart

Vulcan Energy is building a fully integrated lithium and renewable energy production system in Germany’s Upper Rhine Valley. The Lionheart project aims to extract lithium from underground brine while co-producing renewable geothermal energy. The company’s in-house VULSORB technology enables direct extraction of lithium with low environmental impact and reduces carbon emissions compared to traditional mining methods.

Offtake agreements with Stellantis, Renault, Volkswagen, Umicore and LG already cover the majority of the project’s first 10 years of production.

Use of funds

Funds raised will be earmarked for key execution tasks for the Lionheart project, including the initiation of field development planning activities such as rig mobilization, well drilling and procurement for FDP execution. Capital will also be allocated to engineering, procurement, and construction contracts for the development of an organic Rankine cycle geothermal power plant, a lithium extraction plant, and a central lithium plant.

In addition, proceeds will be used for significant execution-related expenditures such as land acquisition, site establishment and major supply contracts. Operating expenses are also included in the funding allocation, with proceeds supporting operating activities and deployment costs.

broader financing

The equity raise is part of a broader funding strategy for the first phase of the Lionheart project. Total funding requirements for the first phase are estimated at €2.2 billion ($3.61 billion), including capital expenditures, financing costs, ownership costs, debt service reserve accounts, start-up costs, and emergencies.

Vulcan is targeting between €1.5 billion and €1.6 billion in debt financing, including loans from the European Investment Bank, Australian Export Finance, Canadian Export Development and commercial lenders. The company has already received conditional approval for debt financing of €120 million from Export Finance Australia.

On the capital side, Vulcan aims to raise between €625 million and €725 million through strategic partnerships, equity and government funding. Recent grants from the German government and the European Recovery and Resilience Facility have already contributed €100 million to the project.