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European Metals Hldg - Quarterly Activities Report

RNS Number : 5554B
European Metals Holdings Limited
31 January 2020
 

For immediate release

31 JANUARY 2020

EUROPEAN METALS HOLDINGS LIMITED

QUARTERLY ACTIVITIES REPORT - DECEMBER 2019

 

European Metals Holdings Limited ("European Metals" or "the Company") is pleased to provide an update on its activities during the three-month period ending 31 December 2019 which highlights the continued progress in the development of the globally significant Cinovec Lithium / Tin Project ("the project" or "Cinovec") in Czech Republic.

 

HIGHLIGHTS:

·     Potential Partnership with CEZ and Significant Investment

POST QUARTER

·     Successful Placing raising approximately AUD 675,000

 

POTENTIAL PARTNERSHIP WITH CEZ AND SIGNIFICANT INVESTMENT

 

On 23 December 2019, EMH Shareholders approved the subscription (the 'Proposed Subscription") of 34,061,265 by CEZ a.s. ("CEZ") through its wholly-owned subsidiary SDAS, for 51% of Geomet s.r.o. the Company's wholly owned Czech subsidiary and the holder of the Cinovec licences. 

Summary of the terms of the Agreement

·    Pursuant to the Exclusivity and Framework Agreement, CEZ has the option to subscribe through SDAS for such number of Geomet Shares as will result in SDAS holding Geomet Shares comprising fifty-one per cent (51%) of the ownership interests and voting rights in Geomet, attached with the right to receive fifty-one per cent (51%) of dividends, liquidation balance and other proceeds payable by Geomet to Geomet Shareholders following completion of the subscription.

·    The amount to be paid by CEZ to Geomet under the option is in total approximately €34.06m, equivalent (at the time of signing) to approximately £29.15m and AUD55.25m. This compares to EMH's market valuation (at the time of signing) of approximately £32.88m (€38.42m; AUD62.32m). The amounts in GBP and AUD included above have been calculated using an average exchange rate for EUR/GBP and EUR/AUD respectively as at 18 November 2019.

·    Completion of the Proposed Subscription is conditional, inter alia, on the satisfaction of the following conditions:

(i)        completion of due diligence in respect of the Company and the Cinovec Project to the satisfaction of CEZ at its sole discretion;

(ii)       the passing of the Ordinary Resolution at the Annual General Meeting and delivery of a certified copy of the Ordinary Resolution to CEZ, which was approved by EMH Shareholders on 23 December 2019;

(iii)      agreement of the initial work programme and budget for Geomet; and

(iv)      CEZ and EMH agreeing the identity of the Chief Executive Officer, the Chief Operating Officer and the statutory auditor of Geomet to be appointed with effect from completion.

·... EMH has agreed to provide CEZ with a period of exclusivity under the Exclusivity and Framework Agreement, with certain break fees payable by EMH if it does not proceed with the Proposed Subscription. In particular, EMH and Geomet have undertaken until 31 March 2020 not to conduct discussions or negotiations or enter into any agreement or arrangement with any person or entity other than CEZ or SDAS in respect of an acquisition of an interest over or in, and/or establishment of a joint venture, partnership or other cooperation in connection with, the Cinovec Project and/or Geomet, by any means.

·... EMH and CEZ have also agreed the form of Geomet Shareholders' Agreement which sets out their rights and obligations as shareholders in Geomet should CEZ exercise the option. The Geomet Shareholders' Agreement includes certain minority shareholder protections with a number of reserved matters which require the approval of both CEZ and EMH, together with deadlock provisions in the event that on completion of the proposed work programme, the parties disagree on a construction decision.

CEZ's core business is the generation, distribution, trade in, and sales of electricity and heat, trade in and sales of natural gas, and coal extraction. As one of the leading Central European power companies, CEZ intends to develop energy storage projects in the Czech Republic and in Central Europe which include energy storage and charging infrastructure and electricity supply, for users of electric vehicles.

 

At the time of this quarterly report the Company and CEZ have been working towards satisfying the above conditions and completion of the transaction.

 

POST-QUARTER

SUCCESSFUL PLACING RAISING APPROXIMATELY AUD 675,000

On 10 January 2020, the Company announced the successful raising of nett proceeds of AUD 675,000 via a share placing ("Placing") to UK investors.

 

The net Placing proceeds will be used to continue to advance the Company's strategy including:

 

·    To progress the development of the Cinovec Project; and

·    Finalise the proposed investment by CEZ Group.

 

CORPORATE 

 

Performance Shares

As at 31 December 2019 the issued performance shares including the terms and conditions were as follows:

Number

Description

Summary Terms & Conversion Hurdles

1,000,000

1,000,000

A Class Performance Shares

B Class Performance Shares

Convert into Shares and an equivalent number of CDIs upon the Company's Mineral Resource at Cinovec South and Cinovec Main being entered in the State Balance. The A Class Performance Shares and B Class Performance Shares shall convert into the number of Shares and equivalent number of CDIs equal to 1,000,000 multiplied by 0.5 and divided by the greater of: (A) $0.50 per CDI; and (B) the volume weighted average price of CDIs (expressed as a decimal of $1.00) as calculated over the 5 ASX trading days prior to the date the Mineral Resource is entered.

1,000,000

1,000,000

A Class Performance Shares

B Class Performance Shares

Convert into Shares and an equivalent number of CDIs upon the issuance of the preliminary mining licenses relating to the Cinovec Project. The A Class Performance Shares and B Class Performance Shares shall convert into the number of Shares and equivalent number of CDIs equal to 1,000,000 multiplied by 0.5 and divided by the greater of: (A) $0.50 per CDI; and (B) the volume weighted average price of CDIs (expressed as a decimal of $1.00)  as calculated over the 5 ASX trading days prior to the date the final preliminary mining license is issued.

3,000,000

3,000,000

A Class Performance Shares

B Class Performance Shares

Convert into Shares and an equivalent number of CDIs upon the completion of a definitive feasibility study (DFS). For clarity, the DFS must be: (i) of a standard suitable to be submitted to a financial institution as the basis for lending of funds for the development and operation of mining activities contemplated in the study; (ii) capable of supporting a decision to mine on the Permits; and (iii) completed to an accuracy of +/- 15% with respect to operating and capital costs and display a pre-tax net present value of not less than US$250,000,000. The A Class Performance Shares and B Class Performance Shares shall convert into the number of Shares and equivalent number of CDIs equal to 3,000,000 multiplied by 0.5 and divided by the greater of: (A) $0.50 per CDI; and (B) the volume weighted average price of CDIs (expressed as a decimal of $1.00) as calculated over the 5 ASX trading days prior to date of receipt of the completed DFS.

(Together the Milestones and each a Milestone.  For the avoidance of doubt, the number of Shares and equivalent number of CDIs which will be issued on conversion of the A Class Performance Shares and B Class Performance Shares will not exceed a ratio of 1 for 1.)

If the Milestone is not achieved or the Change of Control Event does not occur by the required date, then each A Class Performance Share and B Class Performance Share held by a Holder will be automatically redeemed by the Company for the sum of $0.000001 within 10 ASX trading days of non-satisfaction of the Milestone.

 

TENEMENT SCHEDULE

Permit

Code

Deposit

Interest at beginning of Quarter

Acquired / Disposed

Interest at end of Quarter

 

Exploration Area

Cinovec

 

N/A

 

100%

N/A

100%

Cinovec II

100%

N/A

100%

Cinovec III

100%

N/A

100%

Cinovec IV

100%

N/A

100%

Preliminary Mining Permit

Cinovec II

Cinovec South

100%

N/A

100%

Extension Under Application

Cinovec I

Cinovec East

100%

N/A

100%

 

 

BACKGROUND INFORMATION ON CINOVEC

PROJECT OVERVIEW

Cinovec Lithium/Tin Project

European Metals, through its wholly owned subsidiary, Geomet s.r.o., controls the mineral exploration licenses awarded by the Czech State over the Cinovec Lithium/Tin Project. Cinovec hosts a globally significant hard rock lithium deposit with a total Indicated Mineral Resource of 372.4Mt at 0.45% Li2O and 0.04% Sn and an Inferred Mineral Resource of 323.5Mt at 0.39% Li2O and 0.04% Sn containing a combined 7.22 million tonnes Lithium Carbonate Equivalent and 263kt of tin reported 28 November 2017 (Further Increase in Indicated Resource at Cinovec South). An initial Probable Ore Reserve of 34.5Mt at 0.65% Li2O and 0.09% Sn reported 4 July 2017 (Cinovec Maiden Ore Reserve - Further Information) has been declared to cover the first 20 years mining at an output of 22,500tpa of lithium carbonate reported 11 July 2018 (Cinovec Production Modelled to Increase to 22,500tpa of Lithium Carbonate).

 

This makes Cinovec the largest lithium deposit in Europe, the fourth largest non-brine deposit in the world and a globally significant tin resource.

 

The deposit has previously had over 400,000 tonnes of ore mined as a trial sub-level open stope underground mining operation.

 

In June 2019 EMH completed an updated Preliminary Feasibility Study, conducted by specialist independent consultants, which indicated a return post tax NPV of USD1.108B and an IRR of 28.8%  and confirmed that the Cinovec Project is  a potential low operating cost, producer of battery grade lithium hydroxide or battery grade lithium carbonate as markets demand. It confirmed the deposit is amenable to bulk underground mining. Metallurgical test-work has produced both battery grade lithium hydroxide and battery grade lithium carbonate in addition to high-grade tin concentrate at excellent recoveries. Cinovec is centrally located for European end-users and is well serviced by infrastructure, with a sealed road adjacent to the deposit, rail lines located 5 km north and 8 km south of the deposit and an active 22 kV transmission line running to the historic mine. As the deposit lies in an active mining region, it has strong community support.

 

The economic viability of Cinovec has been enhanced by the recent strong increase in demand for lithium globally, and within Europe specifically.

 

There are no other material changes to the original information and all the material assumptions continue to apply to the forecasts.

 

 

CONTACT

For further information on this update or the Company generally, please visit our website at www.europeanmet.com or see full contact details at the end of this release.

 

COMPETENT PERSON

Information in this release that relates to exploration results is based on information compiled by Dr Pavel Reichl. Dr Reichl is a Certified Professional Geologist (certified by the American Institute of Professional Geologists), a member of the American Institute of Professional Geologists, a Fellow of the Society of Economic Geologists and is a Competent Person as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves and a Qualified Person for the purposes of the AIM Guidance Note on Mining and Oil & Gas Companies dated June 2009. Dr Reichl consents to the inclusion in the release of the matters based on his information in the form and context in which it appears. Dr Reichl holds CDIs in European Metals.

The information in this release that relates to Mineral Resources and Exploration Targets has been compiled by Mr Lynn Widenbar. Mr Widenbar, who is a Member of the Australasian Institute of Mining and Metallurgy, is a full time employee of Widenbar and Associates and produced the estimate based on data and geological information supplied by European Metals. Mr Widenbar has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the JORC Code 2012 Edition of the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves. Mr Widenbar consents to the inclusion in this report of the matters based on his information in the form and context that the information appears.

CAUTION REGARDING FORWARD LOOKING STATEMENTS

Information included in this release constitutes forward-looking statements. Often, but not always, forward looking statements can generally be identified by the use of forward looking words such as "may", "will", "expect", "intend", "plan", "estimate", "anticipate", "continue", and "guidance", or other similar words and may include, without limitation, statements regarding plans, strategies and objectives of management, anticipated production or construction commencement dates and expected costs or production outputs.

Forward looking statements inherently involve known and unknown risks, uncertainties and other factors that may cause the company's actual results, performance and achievements to differ materially from any future results, performance or achievements. Relevant factors may include, but are not limited to, changes in commodity prices, foreign exchange fluctuations and general economic conditions, increased costs and demand for production inputs, the speculative nature of exploration and project development, including the risks of obtaining necessary licences and permits and diminishing quantities or grades of reserves, political and social risks, changes to the regulatory framework within which the company operates or may in the future operate, environmental conditions including extreme weather conditions, recruitment and retention of personnel, industrial relations issues and litigation.

Forward looking statements are based on the company and its management's good faith assumptions relating to the financial, market, regulatory and other relevant environments that will exist and affect the company's business and operations in the future. The company does not give any assurance that the assumptions on which forward looking statements are based will prove to be correct, or that the company's business or operations will not be affected in any material manner by these or other factors not foreseen or foreseeable by the company or management or beyond the company's control.

Although the company attempts and has attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in forward looking statements, there may be other factors that could cause actual results, performance, achievements or events not to be as anticipated, estimated or intended, and many events are beyond the reasonable control of the company. Accordingly, readers are cautioned not to place undue reliance on forward looking statements. Forward looking statements in these materials speak only at the date of issue. Subject to any continuing obligations under applicable law or any relevant stock exchange listing rules, in providing this information the company does not undertake any obligation to publicly update or revise any of the forward looking statements or to advise of any change in events, conditions or circumstances on which any such statement is based.

LITHIUM CLASSIFICATION AND CONVERSION FACTORS

Lithium grades are normally presented in percentages or parts per million (ppm). Grades of deposits are also expressed as lithium compounds in percentages, for example as a percent lithium oxide (Li2O) content or percent lithium carbonate (Li2CO3) content.

Lithium carbonate equivalent ("LCE") is the industry standard terminology for, and is equivalent to, Li2CO3. Use of LCE is to provide data comparable with industry reports and is the total equivalent amount of lithium carbonate, assuming the lithium content in the deposit is converted to lithium carbonate, using the conversion rates in the table included below to get an equivalent Li2CO3 value in percent. Use of LCE assumes 100% recovery and no process losses in the extraction of Li2CO3 from the deposit.

Lithium resources and reserves are usually presented in tonnes of LCE or Li.

The standard conversion factors are set out in the table below:

Table: Conversion Factors for Lithium Compounds and Minerals

Convert from

 

Convert to Li

Convert to Li2O

Convert to Li2CO3

Lithium

Li

1.000

2.153

5.324

Lithium Oxide

Li2O

0.464

1.000

2.473

Lithium Carbonate

Li2CO3

0.188

0.404

1.000

Lithium Hydroxide

LiOH.H2O

0.165

0.356

0.880

 

WEBSITE

A copy of this announcement is available from the Company's website at www.europeanmet.com.

TECHNICAL GLOSSARY

The following is a summary of technical terms:

"ball and rod indices"

Indicies that provide an assessment of the energy required to grind one tonne of material in a ball or rod mill

"carbonate"

refers to a carbonate mineral such as calcite, CaCO3

"comminution"

The crushing and/or grinding of material to a smaller scale

"cut-off grade"

lowest grade of mineralised material considered economic, used in the calculation of Mineral Resources

"deposit"

coherent geological body such as a mineralised body

"exploration"

method by which ore deposits are evaluated

"flotation"

selectively separating hydrophobic materials from hydrophilic materials to upgrade the concentration of valuable minerals

"g/t"

gram per metric tonne

"grade"

relative quantity or the percentage of ore mineral or metal content in an ore body

"heavy liquid separation"

is based on the fact that different minerals have different densities. Thus, if a mixture of minerals with different densities can be placed in a liquid with an intermediate density, the grains with densities less than that of the liquid will float and grains with densities greater than the liquid will sink

 

"Indicated" or "Indicated Mineral Resource"

as defined in the JORC and SAMREC Codes, is that part of a Mineral Resource which has been sampled by drill holes, underground openings or other sampling procedures at locations that are too widely spaced to ensure continuity but close enough to give a reasonable indication of continuity and where geoscientific data are known with a reasonable degree of reliability. An Indicated Mineral Resource will be based on more data and therefore will be more reliable than an Inferred Mineral Resource estimate

 

"Inferred" or "Inferred Mineral Resource"

as defined in the JORC and SAMREC Codes, is that part of a Mineral Resource for which the tonnage and grade and mineral content can be estimated with a low level of confidence. It is inferred from the geological evidence and has assumed but not verified geological and/or grade continuity. It is based on information gathered through the appropriate techniques from locations such as outcrops, trenches, pits, working and drill holes which may be limited or of uncertain quality and reliability

 

"JORC Code"

Joint Ore Reserve Committee Code; the Committee is convened under the auspices of the Australasian Institute of Mining and Metallurgy

"kt"

thousand tonnes

"LCE"

the total equivalent amount of lithium carbonate (see explanation above entitled Explanation of Lithium Classification and Conversion Factors)

"lithium"

a soft, silvery-white metallic element of the alkali group, the lightest of all metals

"lithium carbonate"

the lithium salt of carbonate with the formula Li2CO3

"magnetic separation"

is a process in which magnetically susceptible material is extracted from a mixture using a magnetic force

"metallurgical"

describing the science concerned with the production, purification and properties of metals and their applications

"Mineral Resource"

a concentration or occurrence of material of intrinsic economic interest in or on the Earth's crust in such a form that there are reasonable prospects for the eventual economic extraction; the location, quantity, grade geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge; mineral resources are sub-divided into Inferred, Indicated and Measured categories

"mineralisation"

process of formation and concentration of elements and their chemical compounds within a mass or body of rock

"Mt"

million tonnes

"optical microscopy"

the determination of minerals by observation through an optical microscope

"ppm"

parts per million

"recovery"

proportion of valuable material obtained in the processing of an ore, stated as a percentage of the material recovered compared with the total material present

"resources"

Measured: a mineral resource intersected and tested by drill holes, underground openings or other sampling procedures at locations which are spaced closely enough to confirm continuity and where geoscientific data are reliably known; a measured mineral resource estimate will be based on a substantial amount of reliable data, interpretation and evaluation which allows a clear determination to be made of shapes, sizes, densities and grades. Indicated: a mineral resource sampled by drill holes, underground openings or other sampling procedures at locations too widely spaced to ensure continuity but close enough to give a reasonable indication of continuity and where geoscientific data are known with a reasonable degree of reliability; an indicated resource will be based on more data, and therefore will be more reliable than an inferred resource estimate. Inferred: a mineral resource inferred from geoscientific evidence, underground openings or other sampling procedures where the lack of data is such that continuity cannot be predicted with confidence and where geoscientific data may not be known with a reasonable level of reliability

"SAGability"

testing material to investigate its performance in a semi-autonomous grinding mill

"spiral concentration"

a process that utilises the differential density of materials to concentrate valuable minerals

"stope"

underground excavation within the orebody where the main production takes place

"t"

a metric tonne

"tin"

A tetragonal mineral, rare; soft; malleable: bluish white, found chiefly in cassiterite, SnO2

"treatment"

Physical or chemical treatment to extract the valuable metals/minerals

"tungsten"

hard, brittle, white or grey metallic element. Chemical symbol, W; also known as wolfram

"W"

chemical symbol for tungsten

 

 

ADDITIONAL GEOLOGICAL TERMS

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