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European Metals Holdings receives offer for majority stake in Cinovec

Snapshot

Here we take a deep dive into the mechanics of European Metals Holdings PLC (LON:EMH) (ASX:EMH), which in the Cinovec project has a tiger by the tail

Drilling work at Cinovec

Quick facts: European Metals Holdings

Price: 17.5 GBX

AIM:EMH
Market: AIM
Market Cap: £26.39 m
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  • Owns Europe's largest lithium deposit at Cinovec

  • Czech group CEZ to take majority stake in project

  • Preparing a definitive feasibility study for Cinovec

What the company does

The company’s blurb describes European Metals Holdings PLC (LON:EMH) (ASX:EMH) as a UK and Australia-listed exploration business focused on developing a lithium and tin project in the Czech Republic.

But this doesn’t quite capture the potential of the business through its ownership of the Cinovec Project, host to the largest lithium resource in Europe and one of the biggest untapped tin deposits in the world.

In other words, EM has a tiger by the tail.

Cinovec is around 60 miles north-west of Prague on the border with Germany.

So, it has ready access to end-users such as carmakers and companies building the latest generation of electric vehicles.

 Volkswagen's decision to locate its first electric vehicle plant at Zwickau, 90km from Cinovec suggests it is in the right place.

 Zwickau is due to come on stream in November. VW has also announced a 16Gw battery cell factory will be built in conjunction with green energy group Northvolt.

Cinovec is host to an inferred and indicated resource of almost 700mln tonnes at a cut-off of 0.195% lithium and 0.04% tin.

Total indicated resources are 372.4mln tonnes grading 0.45% Li2O and 0.04% tin.  

A preliminary economic assessment (PEA) suggests an operation on the site of the historic mine churning out 22,500 tonnes a year of battery-grade lithium would cost US$393mln.

Lithium hydroxide is among the products EME intends to produce.

European Metals recently extended its exploration licence at Cinovec, which is in the Czech Republic, until the end of 2020.

In November, local power utility CEZ offered to buy a 51% stake in Geomet, the subsidiary that owns the project, and to become its strategic partner.

Keith Coughlan, EMH’s managing director, said if the deal is concluded the money would fund Cinovec through to a construction decision.

CEZ will pay €34mln for a 51% stake in Geomet.

Keith Coughlan, EMH’s managing director, said if the deal is concluded the money would fund Cinovec through to a construction decision.

What the broker says: Ryan Long, mining analyst at Proactive

The Cinovec Zinnwaldite Project, has a total JORC 2012 compliant mineral resource estimate of 695.9 million tonnes (mt) at a grade of 1% lithium carbonate equivalent (Li2CO3 E), which makes it the third largest igneous lithium deposit globally, with a contained Li2CO3 E content of 7.2mt.

So CEZ Group is potential acquiring its 51% interest in the project at a value of US$10.3 per tonne (t) of lithium carbonate equivalent in resource.

This compares to our estimate for the average lithium deal value for the year to date of US$95.1/t Li2CO3 E.

So, at first look the deal looks cheap compared to other lithium deals completed this year.

However, the range of lithium deal valuations varies from US$5.8/t Li2CO3 E to US$224.2/t Li2CO3 E, which is a large range.

While this deal is towards the lower end of the value range, the majority of these deals were completed earlier in the year, when sentiment towards the lithium space was not as negative.

Also, many of these deals were for other types of lithium projects such as brines and spodumene deposits, which are given a higher market value than zinnwaldite deposits.

The only other deal involving a zinnwaldite project this year was done at an average price of US$5.8/t Li2CO3 E, so the European Minerals – CEZ Group deal is 78% increase on the other zinnwaldite deal.

Inflexion points

  • Investment by CEZ is confirmed 
  • Completion and publication of DFS for Cinovec
  • Lithium hydroxide capability confirmed by testwork

 

 

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European Metals' Keith Coughlan discusses significant potential partnership...

European Metals Holdings Ltd's (LON:EMH) managing director Keith Coughlan caught up with Proactive London's Andrew Scott following the news they've secured a €2mln convertible loan from CEZ Group - one of Central and Eastern Europe's largest power utilities. Coughlan says the successful...

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