Sean Gallup/Getty Images News
Sean Gallup/Getty Images News
This article first appeared on Trend Investing on January 14, 2022, but has been updated for this article.
Electric car sales in Europe are the second largest region globally, only behind China. The European region is seeing an unprecedented amount of activity towards new electric vehicle and battery manufacturing plants. The region is about to get a rush of publicity as Tesla's ( TSLA) gigafactory Berlin is expected to open soon in 2022.
For a background on the European lithium-ion battery expansion plans you can read my article:
EU Battery manufacturers - Existing and new gigafactories announced
A similar showing the huge Li-ion battery factory build up that is coming this decade
Savannah Resources presentation courtesy Roland Zenn
Savannah Resources presentation courtesy Roland Zenn
Source: Savannah Resources company presentation - September 2021
Given that we are about to see a lot more attention on Europe, Europe is a leading buyer of EVs, many European battery factories are on the way, it makes sense to look at what European projects will be able to supply these factories with EV raw materials, starting with lithium.
European Lithium Limited [ASX: EUR] [FRA: PF8](OTCPK:EULIF) - Price = A$0.10
European Lithium 100% owns the Wolfsberg Lithium Project in Austria, 20 km east of Wolfsberg, an industrial town, with established infrastructure, including access to the European motorway and railway network.
The Wolfsberg Lithium Project is a underground hard rock lithium deposit with historical exploration a JORC resource and exploration upside. It is an existing exploration mine and is close to road and rail infrastructure. European Lithium stated: "All exploration licences are extended by the mining authority until 31 December 2024. The mining licence can be held in perpetuity provided its conditions are maintained."
The Company stated that they have "exploration licenses (54) covering Zone 1 + 2 as well as Mining license permanently issued under applicable terms....are targeting production to commence in 2023 with potential to be the first battery-grade lithium producer in Europe."
Note that European Lithium also stated in their development strategy: "Start permitting process based on DFS project configuration.....prepare mining plan for the Mining Authority to authorise the mine and concentrator construction.....Determine approval requirements of the carbonate / hydroxide conversion plant with EIA." So some further approvals are necessary.
Wolfsberg has a Measured, Indicated & Inferred JORC compliant Resource of 10.98m tonnes at 1% Li2O (see below recently upgraded Resource news) in Zone 1. The Company stated: "Positive drill results in Q1 2018 confirms Zone 2 could mirror Zone 1 resource, doubling project resource."
European Lithium has completed a PFS (based only on current M&I Resources of 6.3Mt at 1.17% Li2O) and is now working on a DFS for the Wolfsberg Lithium Project. The Wolfsberg Lithium Project 2018 PFS resulted in a pre-tax NPV8% ofA$441.9m (US$339.4m), pre-tax 25.6% IRR in an accelerated scenario that produces 10,129tpa of lithium hydroxide ("LiOH") over a 10 year mine life. The estimated cost of production was US$6,561/tonne LiOH. CapEx estimated at US$423.6m.
European Lithium has completed a Pilot Plant, produced battery grade LiOH, announced a non-binding offtake MOU with Traxys (also to support the development and commercialization of the Wolfsberg Project), and has started discussions with several European institutions to progress project financing. A DFS is the next step and some further drill results and a possible Ukraine deal (see below).
I was unable to find any price targets.
European Lithium trades on a market cap of A$119m. Seems an interesting project with an established underground mine infrastructure. Worth a smaller bet for long term investors looking to gain exposure to European lithium projects. Risk remains high at this stage.
You can read the latest company presentation here and a video here.
European Lithium's underground Wolfsberg Lithium Project has a conditional Mining license and is targeting to commence production in 2023
European Metals Holdings [ASX:EMH] [AIM:EMH] (OTCPK:ERPNF) - Price = AUD 1.23
European Metal Holdings ("EMH") effectively owns 49% of the Cinovec Lithium-Tin Project with partner CEZ (51%) via their holding in Geomet (Cinovec Project owner), in the Czech Republic 100 km NW from Prague on the border with Germany. The Project is located in a historic mining region and is a past producing underground tungsten and tin mine. You can read the full history here. Cinovec is fully funded to final investment decision.
EMH stated: "Cinovec hosts the largest lithium resource in Europe, and one of the largest undeveloped tin resources in the World."
Cinovec's total Indicated Mineral Resource is 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. An initial Probable Ore Reserve of 34.5Mt at 0.65% Li2O and 0.09% Sn. Later this was upgraded to 7.39 Mt LCE.
The Cinovec Project updated 2019 PFS (100% project basis) resulted in a post-tax NPV8% of US1.108b, post-tax IRR of 28.8% based on 25,267tpa LiOH (selling at US$12,000/t) and a 21 year mine life. Initial CapEx is US$482.6m and OpEx is US$3,435/t (net of by-product credits).
Cinovec updated 2019 PFS highlights (note EMH owns 49% of Cinovec)
The DFS is to be based on a 25,000 tpa lithium hydroxide plant to be located within 7km of the mine. The Cinovec Project is adjacent to a main road with two rail lines within 10km of the deposit.
EMH stated: "The DFS is anticipated to be completed in Q2 2022 with contracts for construction of the plant to be awarded shortly thereafter."
Final steps will be EIAs, permitting for mining & processing, and project funding. Possible 2024 producer if things go well.
I was unable to find any price targets. My end 2025 price target (assuming 25,267tpa LiOH production selling at US$20,000/t) is A$4.86, representing 3.9x upside. Significant further upside at higher LiOH prices.
European Metals Holdings trades on a market cap of A$240m. Lithium grade is low but lithium prices are high and the resource is huge. Plus they have a very valuable tin (US$41,402/t) by-product to make up for that. Permitting and project funding (US$482.6m) looks to be the main risks/challenges, however should be easier now that EMH own just 49% of the project and has CEZ (state-controlled power company) as a local partner and Cinovec is a past producing mine. Some Czech country risk.
Looks to a good spec buy.
Cinovec's Czech location is close to many future European battery manufacturers
Infinity Lithium Corp. - Price = AUD 0.16
Infinity Lithium ("Infinity") is an Australian company seeking to develop its 75% owned San Jose Industrial hard rock Lithium Project located in Spain. Infinity stated that they have the "2nd largest hard rock lithium deposit in the EU."
The Project is located approximately 3 hours from Madrid and 3.5 hours from Lisbon accessible by dual lane highway, whilst remaining in the immediate proximity of key infrastructure including a gas pipeline adjacent to the Project area. The San Jose deposit is a highly advanced, previously mined brownfields development opportunity and represents one of Europe's largest lithium deposits. Infinity Lithium will mine the hard rock mica resource and develop processing facilities to provide a strategically essential European mine-to-end-product lithium chemicals operation.
Generally I am not a big fan of 'mica' (waste rock) resources as the grade tends to often be low. In this case the grade is ok at 0.74% Li2O.
Resource estimate for the San Jose Industrial hard rock Lithium Project
The resource is sizeable and the Scoping Study (integrated project to produce LiOH) results are good (see below) showing the San Jose Project is feasible if they can raise the CapEx of US$532.2m.
Infinity stated: "The project will be developed via underground extraction of ore which will be treated and refined onsite to produce high quality, battery grade lithium hydroxide."
Infinity Lithium trades on a market cap of A$68m. Worth considering.
Savannah Resources [LON AIM:SAV] [GR:SAV] (OTCPK:SAVNF) - Price = GBp 4.40, EUR 0.05
Savannah Resources is advancing their 90% owned Mina do Barroso Lithium Project in northern Portugal. They are targeting to become Europe's first major lithium producer.
Savannah stated they have the "largest conventional lithium project in Europe" with significant exploration upside.
As of May 2019 the Project has a JORC compliant resource of 27Mt containing 285,900t of Li2O at an average grade of 1.06% Li2O (707,000t lithium carbonate equivalent) across five ore bodies. There is existing exploration upside which was boosted in 2019 by expanding the project's land by 50% from the acquisition of 3 adjacent mining blocks.
The 2018 Scoping Study resulted in a post-tax NPV8% of US$241m, post-tax IRR of 48.6%, and a US$109m initial CapEx (including contingency). The study was based on production of 175ktpa spodumene @US685/t with a mine life of 11 years (2.1 year payback) and at a C1 cash cost of US$271/t.
Next steps include an environmental license, a DFS expected in 2022, then potential project financing and construction, with potential to become a 2024 lithium spodumene producer.
Valuation is attractive on a current market cap of GBP 74m (US$100m).
Analyst's consensus price target is GBp 13.97 representing 217% upside. Looks a very good buy ideally via the UK listing where liquidity is better.
Savannah Resources Mina do Barroso Project and company summary
Zinnwald Lithium [LN:ZNWD] - Price = GBp 16.50
Zinnwald Lithium 100% owns the 100% interest in the Zinnwald Lithium Project 35km from Dresden in Germany. Zinnwald is developing an integrated project designed to produce a suite of value-added downstream battery-grade lithium products. It is an underground Project with a core mining licence valid until 2047.
The Measured & Indicated Mineral Resource estimate is 35.51mt at a grade of 3,519 ppm (~0.35%) containing 124,974t Li at cut-of grade of 2,500 ppm (0.25%) Li. 0.35% a very low grade resource. However on the Company presentation (page 12) they also quote 40.4mt at 0.76% Li2O% (0.5% cut off).
The May 2019 Feasibility Study resulted in a pre-tax NPV8% of €428m and a pre-tax IRR of 27.4%, based 5,112tpa (~7,285 tpa LCE) of battery-grade lithium fluoride, over a 30 year lifespan. Initial CapEx is €159m.
Next steps include advancing permit applications for mining and mineral processing, LiOH testwork, further drilling, off-take discussions. The Company holds an approved Mining License for the Zinnwald deposit and has a completed Project Environmental Impact Assessment [EIA]. Final approvals for construction and operation would be issued once a project construction timetable is submitted to the local authorities.
Zinnwald Lithium trades on a market cap of GBP 56m. A small project production with a question over grade. Germany location and low initial CapEx a plus. No view until I discover the correct grade.
Comparison of Zinnwald Lithium to peers as of 2 November 2021
The European lithium juniors are generally not as good as their global peers in terms of resource grades and quality. However they are located in Europe where a burst of new battery manufacturing is coming this decade, meaning there is a huge demand for their product.
My top pick of the five major European lithium juniors would be European Metals Holdings due to its massive resource size and favorable economics due to very valuable tin and lithium products and current prices. My next top picks would be Savannah Resources and European Lithium, however Infinity Lithium also has some appeal.
Risks in European projects often revolve around the difficulty of getting permitted as well as some countries not being very mining friendly. Also the usual corruption related risks in poorer countries. Currently there is also the very real risk of a Russia invasion of Ukraine. Please read the risks section.
Overall, I think it makes good sense to own some European lithium juniors as the region is the second highest market for EVs and has over 22 new battery factories on the way this decade.
As usual, all comments are welcome.
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Disclosure: I/we have a beneficial long position in the shares of EUROPEAN METALS HOLDINGS [ASX:EMH] , SAVANNAH RESOURCES [XETRA:SAV] , EUROPEAN LITHIUM [ASX:EUR], TSLA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The information in this article is general in nature and should not be relied upon as personal financial advice.