Junior miners tend to face all sorts of difficulties in the early stages of their projects, from navigating regulatory, environmental and political risks, raising finance before they actually have a production in place, to permitting and eventually offtake agreements. European Metals Holdings Ltd (LON:EMH), the junior miner developing a lithium project in the Czech Republic, has set itself apart from the rest of the pack by signing three key contracts last year which address all of those issues, and managed to do so during the worst of the world’s pandemic.
EMH plans to produce lithium, a metal much in demand from electric car producers with its site located in the centre of Europe, within close range of a massive car industry that includes Volkswagen’s largest EV factory in Poland and Tesla’s giga factory outside of Berlin.
Three key contracts
In March last year European Metals brought on board the Czech state power utility CEZ with a deal worth just under €30m which will be sufficient to fund work on the Cinovec lithium project, all the way to the final investment decision due in the next 12 to 14 months, Executive Chairman Keith Coughlan told The Armchair Trader. As a state-owned entity, CEZ will be in the position to help with permitting and will reduce any political risks but possibly more importantly, CEZ will be a genuine long term partner as it has aspirations to build two battery factories and is involved in all of the electric charging network in the country.
The second key contract was signed with the European Institute for Innovation and Technology (EIT), a European Union entity, a key player in Europe’s plans to build a strong domestic battery industry. As European production of EVs mushroomed the bloc has become increasingly keen to have independent supply of raw materials that will be needed in the process, and has put significant financing in place to help set up local production. EIT’s role will be to help Cinovec with raising funding, grants, permitting and offtake agreements. The later has already led to preliminary conversations with five potential offtakers, Coughlan told us.
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Finally in September last year European Metals hired German engineering firm SMS as the lead engineer for Cinovec. SMS plans to complete a definitive feasibility study in the next 12 months with a key component being a fixed-price lump sum turn-key EPC contract that will have process guarantees and project specifications guarantees in place.
Lithium to trade as an LME contract later this year
For years lithium has been in the space of minor metals, the type of metal traded only by a relatively small number of traders with specific interests. But that is changing and even the venerable London Metal Exchange, the trading home for base metals, is planning to launch a lithium hydroxide futures contract in the first half of this year.
This contract is a nod to how important lithium has become in the last few years. In 2020 Europe for the first time overtook China as the world’s largest producer of electric vehicles. An average electric car may need something in the range of 40kg of lithium for its lithium-ion battery and the UK’s and Europe’s ambitious targets between now and 2030 and 2035 mean that European car manufacturers will be pumping out electric cars by the millions over the next two decades.
With a plan to start production of battery-grade lithium by late 2023 or early 2024 EMC is more than well positioned to benefit from this expansion.