Lithium developer Vulcan Energy [ASX:VUL] rose as much as 30% on Friday after conglomerate automaker Stellantis made a $76 million equity investment in the stock.
Stellantis will become VUL’s second largest shareholder with an 8% stake, following the issue of 11.5 million fully paid ordinary shares at a 30-day volume weighted average price of $6.62 a share.
Stellantis has made the most of a dip in lithium stocks, with VUL itself down 50% year to date prior to Stellantis’s investment.
With ASX lithium stocks tumbling this year, does Stellantis’s equity investment indicate the bottom is in?
Or will lithium stocks fall further in 2022?
Vulcan wins top-range car manufacturer Stellantis as investor
Vulcan announced that global automaker Stellantis is set to invest $76 million to become VUL’s second largest shareholder.
Stellantis owns a wide range of brands, including Alfa Romeo, Chrysler, Citroen, Fiat, Jeep, and Peugeot.
Vulcan will issue Stellantis 11.5 million shares at a price of 6.62 a share.
Vulcan says that this is the first time a ‘top-tier automaker’ has made such an investment in an ASX-listed lithium company.
The investment will fund production and drilling in Vulcan’s Upper Rhine Valley Brine project.
Both Stellantis and Vulcan have also taken the opportunity to extend their binding lithium hydroxide offtake agreement to a five-year term.
Vulcan’s Managing Director Dr Francis Wedin said:
‘Stellantis’ significant investment in Vulcan and the Zero Carbon Lithium Project represents a strong statement by one of the world’s largest automakers regarding sustainable and strategic sourcing of battery materials.
‘We are fully aligned with Stellantis’ decarbonisation and electrification goals, which represent some of the most ambitious in the industry.
‘It is encouraging to see a leading automaker investing in local, decarbonised lithium production for electric vehicles. As our largest offtaker, we look forward to deepening our relationship with Stellantis as a substantial shareholder in Vulcan and our Zero Carbon Lithium™ business.’
The enthusiastic market reaction to Stellantis’ $76 million equity stake suggests the market is seeing in Stellantis’s investment a validating sign of Vulcan’s prospects.
Why become a second-largest shareholder of a company if you don’t think its prospects are sound?
Carlos Tavares, Stellantis CEO, commented:
‘Making this highly strategic investment in a leading lithium company will help us create a resilient and sustainable value chain for our European electric vehicle battery production. We continue our quest of forming strong relationships with partners who share our values as we collectively fight against global warming and provide clean, safe and affordable mobility to our customers.’
That said, Vulcan is still well down on its all-time high of $16.65 reached in September last year.
Now, while lithium has garnered plenty of attention over the past few years, it isn’t the only necessary material for the electric vehicle (EV) revolution.
Materials like cobalt, nickel, copper and graphite are just as necessary to power the world’s electric fleet.
Given the acute interest in lithium stocks, there may be a smarter way to play the EV theme than loading up on lithium stocks.
The flood of capital into the lithium sector is making our team at Money Morning think there’s a better way to play the EV boom.