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European Metals Holdings: THE INVESTMENT CASE

European Metals keen for rapid development at Cinovec

Cinovec can produce 20,800 tonnes of lithium carbonate annually for 21 years at a cost of US$3,483 per tonne
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European Metals Holdings PLC (LON:EMH) hailed a pre-feasibility study at Cinovec in the Czech Republic as confirmation it can be one of the world’s lowest cost hard rock lithium carbonate deposits.

The resource has already been been established at nearly 11 mln tonnes of lithium carbonate equivalent but it is in the realm of costs, that Keith Coughlan, managing director, reckons the deposit has a real advantage.

Because while Cinovec is relatively low grade, the costs of getting lithium carbonate out of the ground will be very low indeed.

That’s because the type of ore that hosts the lithium at Cinovec is mica, while most other hard rock lithium deposits are hosted in spodumene, and it takes more heat and more reagent to extract value from spodumene than it does from mica.

“We don’t have to heat it to anywhere near the same temperature,” says Coughlan. “That means our operating cost is going to be very much in the bottom end of the global cost curve.”

And given the size of Cinovec, that should make for quite some operation. “We have the largest lithium resource in Europe,” says Coughlan. “We have the fourth largest non-brine resource in the world. And it could be bigger, but we’re not bothering with that for now.”

PFS suggests at least 21 year mine life 

Now investors also have some hard numbers to roll around. 

On a study based on around 10% of the deposit, the report indicated Cinovec can produce 20,800 tonnes of lithium carbonate annually for 21 years at a cost of US$3,483 per tonne.

Total capital cost would be US$393mln, with the return over the mine’s life over and above this outlay (net present value) estimated at US$540mln.

WATCH: European Metals' boss "comforted" by pre-feasibility study ...

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Analysts suggested the internal rate of return of 21% was on the low side, while Shore Capital was also nervous about the effect on the numbers of a drop in assumed lithium prices.

Coughlan was pleased with the outcome even so and said Cinovec had unique geological and metallurgical characteristics that coupled with the macro outlook for the lithium industry, particularly in Europe, it was a very attractive project.

“It is 500 miles away from annual car production of 6-7mln cars, with an increasing number of those electric,” he said.

Definitive study the next step before construction decision 

A definitive feasibility study to give a more detailed assessment of the deposit (and its economics) will get underway almost immediately, he added and take about a year to complete.

“We need to get into production as soon as we can”.

There will be by-products of tin, potash and tungsten but “lithium is the key driver of the project".

According to Deutsche Bank, global lithium demand increased 15% year on year. There may be some 'retracement' in 2017, but the medium-term demand looks robust, it added.

Shares fell 15% to 64.9p on the PFS, but that is more than 300% higher than a year ago.  

 

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