Minerals, or at least access to their supply, has been thrust once again into the headlines with the $500bn (£387bn) critical minerals deal between Ukraine and US being the lynchpin to securing a ceasefire, and hopefully lasting peace, in the three-year war between Ukraine and Russia.
Resource nationalism and the tug-of-war between national governments and multinational corporations (backed by other national governments) has created numerous global flashpoints in parts of Africa, Asia, the Middle East and Europe, which have in several places escalated to armed confrontation.
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Moreover, national governments have prioritised control of resources within their own territories, and often other people’s territories – especially of the metals and minerals that are key to ‘future technologies’ such as renewable energy, battery storage, and technology. These include the rare earth elements (17 specific compounds that have diverse applications in electrical and electronic components, lasers, glass, magnetic materials, and industrial processes), lithium, platinum-group metals, and other lustrous, conductive metals; as well as the older, more-traditional bulk commodities, including iron ore, coal, petroleum and nitrogen.
Germany goes all-in on electrification
Germany, the traditional industrial powerhouse of Western Europe, has committed to generating 80% of its electricity from renewable sources and have a minimum of 15 million electric cars on the Autobahns within the next five years. To do this, it will need secure and sustained access to strategic minerals. The War in Ukraine has torpedoed Germany’s industrial strategy, as it has not only been one of the main financial supporters of Ukraine militarily, creating a fiscal drag on the performance of the economy with more commitments to be made; but has also seen the economy tip to recession on rising fuel cost, not least because of the destruction of the NordStream Gas pipeline between Russia and Germany early in the war.
NordStream was initiated to supply cheap gas from Russia to Europe through Germany, and was opposed by the US, with President Biden’s administration sanctioning companies that were involved in the construction. The pipeline now lies in bits on the floor of the Baltic Sea with a $11bn bill still to be settled by Germany and Finland, and Germany having to switch quickly to more-expensive imported liquefied gas, which sent ruptures through the German economy.
Prioritising Lithium
It’s not as if Germany doesn’t have its own resources. The country has large deposits of thermal and bituminous coal in the north, salt and potash, and copper and uranium in the eastern part of Germany. However, to furnish its significant industrial base, Germany must import most of its industrial commodities. To meet its ambitious electrification targets, it will need to secure significant amounts of strategic minerals, a task made more difficult with the German government’s avowed intention to decouple from reliance on China.
In those salt and potash deposits and elsewhere, there is also lithium, a key ingredient in battery technology for vehicles as well as renewable energy. The leading company prospecting for lithium in Germany is AIM-listed explorer, Zinnwald Lithium LON:ZNWD, which published its final results to end-December today (10th March).
Zinnwald is focused on developing the Zinnwald Lithium Project, a significant hard rock lithium deposit located near Dresden in eastern Germany. This project is recognized as one of Europe’s largest lithium resources, with a recent mineral resource estimate indicating approximately 2.66 million tonnes of lithium carbonate equivalent. The project is strategically situated near Europe’s chemical and automotive industries, benefiting from Saxony’s rich mining history and existing infrastructure. The company plans to establish a modern underground mine employing innovative and sustainable mining methods to efficiently extract lithium.
In 2024, Zinnwald Lithium conducted an extensive drilling program, completing 84 drill holes totalling 27kms of core samples. This effort significantly expanded the resource base and enhanced understanding of the ore body, leading to a 445% increase in the mineral resource estimate compared to the previous assessment in 2018.
Developing processing facilities
The company is also advancing processing tests in collaboration with partners like Metso, aiming to improve recovery efficiency and reduce environmental impact. Additionally, Zinnwald Lithium is exploring a phased expansion strategy, with the first phase expected to produce between 16,000 to 18,000 tonnes per annum of battery-grade lithium hydroxide, a 50% increase from earlier estimates.
Former German chancellor, Olaf Scholz, recently (pre-election) visited Zinnwald’s lithium project, underlining German government support as a strategic priority for the project. These developments position Zinnwald Lithium as a key player in Europe’s efforts to secure local, sustainable sources of critical raw materials essential for the energy transition.
Although the project is very exciting for Zinnwald, the company is still in early-exploration phase, which flows through to the company’s balance sheet. The explorer has been spending heavily, seeing its cash fall from €14.3m (£12m) to €5.2m over the year. Losses were also up from €2.64m in 2023, to €2.74m last year which translated into operating losses of €3.1m, up from €2.9m. That said the company increased its intangible assets by €6.5m to €34.2m, which reflected its continued investment in the project. Liabilities also fell by a marginal €100,000 to €2.8m.
Given the strategic nature of lithium in the EU, the company is planning on tapping into EU exploration funding for the metal as well as accessing German federal funding and Saxony regional funding for strategic minerals projects.
The company will not be making a profit for a while, at least until it’s commercially producing lithium. But it seems to be operating at the right time – given Germany’s strategic and economic focus – and right place – close to Europe’s largest economy’s industrial heartland – at the moment.
The company’s shares opened the week at 6.02p, down 7.4% over one-year, with shares ranging between 5.4p and 12.72p over a 52-week period. The company has a market capitalisation of £29.7m.
Zinnwald Lithium finds itself at the intersection of geopolitics, energy security, and industrial strategy. While still in its early development phase, the company has made significant progress in expanding its resource base and positioning itself as a key supplier of battery-grade lithium hydroxide. With strong governmental interest, a prime location near Europe’s industrial core, and growing demand for locally sourced critical minerals, Zinnwald Lithium is well-placed for future growth. However, securing financing and advancing towards commercial production remain key hurdles. As Germany and the EU push for resource independence, Zinnwald Lithium could become a crucial part of Europe’s lithium supply chain.
