Billionaire Elon Musk has created a buzz with his plans for a US$5bn Tesla Gigafactory in the desert of Nevada that will eventually churn out 500,000 lithium ion batteries a year.
A huge undertaking, the economic impact will be felt locally as thousands of new jobs are created.
But it is also having an unexpected impact internationally – and on a very specialist segment of the mining industry.
For the giant production facility will require vast amounts of lithium used in the batteries that power these futuristic vehicles.
So much so that the Gigafactory is expected to suck in most of North America’s supplies, which will have ramifications globally.
The element is used in the power units for tablets, phones and laptops. Security of supply might explain why the Chinese have taken control of Australia’s Talison, one of the world’s biggest suppliers of the white-silver metal.
This shift in the tectonic plates will, over the next few years, leave Europe scratching around to meet its needs, which currently stands at 35,000 tonnes year.
All of it is imported, given that the continent has only one source of supply – in Portugal – which feeds in the local ceramics industry.
It is against this backdrop that European Lithium is coming to the London market with the modest aim of raising £5mln.
That cash could go a long way to de-risking the Wolfsberg project in Austria.
Earlier scoping studies considered a production capacity of 9,000 tonnes of battery grade lithium carbonate a year. The company is studying the potential of higher production rates and if it can hit 12,000 tonnes then that would meet a third of Europe’s current needs.
If all goes to plan, then Wolfsberg, which is in the middle of a commercial forest, could start construction in 2017 and be in production the by end of 2018. Based on the scoping study it would cost an estimated US$200mln.
This might seem like a rather short time-line for a mining project. But a lot of historic work has already been carried out on the property, which already boasts a mining licence.
Since it was first identified in 1981, 17,000 metres of drilling and 1,400 metres of underground mine development have taken place.
There has been extensive metallurgical testing carried out by former owners Minerex, and even some trial mining.
The cash from the IPO will be used to complete a pre-feasibility study that will build on the previous Minerex data, validate the resource declared by former owner Global Strategic Metals at 17mln tonnes of 1.3% lithium oxide.
The mineralisation sits either side of an anticline - a fold of rock that moves to a crest.
Only the northern side of that geological structure has been systematically drilled to get to the current resource.
The company will undertake exploration on the southern side of the anticline which it believes has the potential to mirror the resource on the northern side.
The intention is to increase the size of Wolfsberg’s resource base to a point where it could support annual production of 12,000 tonnes per year for an extended period.
It is hoped the IPO funds will allow management to put together a pre-feasibility study that will give current and prospective investors an insight into the optimum capacity and economics of Wolfsberg.
It will need further money to compile a bankable feasibility study required by the banks that are likely to part-finance construction.
Chief executive Steve Kesler said all funding options are open to it – so investors shouldn’t assume they will be tapped for the cash required for the bankable feasibility study.
Likewise it will consider its options for the construction phase closer to the time.
But Kesler believes Wolfsberg is a small enough project to develop on its own.
“This is a very different project to most,” says the CEO.
“I have seen many AIM mining juniors go away and explore for bulk commodities such as iron ore or copper in far flung parts of the world.
“They come back and say they have a very interesting project, but the capital costs are US$2-3bn because of the lack of infrastructure. They will never get the finance. I think we will as the infrastructure in Austria is already in place.”
The City broker VSA Capital is acting as sole book-runner – which means it is in charge of the institutional tranche of the fund-raise.
However, the company also plans to garner some of its IPO funding via the Primary Bid platform that opens share placings to private investors.
“There is a lot of excitement in the lithium space – everyone can connect with it; we are all using laptops, mobiles and tablets and we are starting to see electric vehicles on our roads,” says Kesler.
“Clearly Elon Musk and Tesla have been great for the advertising.”