European Metals and CEZ Ready Cinovec for EV Revolution

By Barry Fitzgerald | More Articles by Barry Fitzgerald

The European Union’s big-spending commitment to developing a secure battery supply chain in support of its decarbonisation targets is “delivering at light speed.’’

The comment was made in March by Maroš Šefčovič, a vice-president of the European Commission (EC), the executive arm of the European Union, after a meeting with the European Battery Alliance (EBA).

The EBA was created by the EC in October 2017 to oversee the development of a European-centric battery supply chain estimated to have an annual market value of €250 billion from 2025, and critical to the migration of transport, power and industry away from fossil fuels.

After his meeting with more than 500 companies and industry groups involved in the battery industry from mining through to recycling, Šefčovič said Europe had turned in to a “battery hotspot’’ and was “rapidly closing the investment gap with its major Asian competitors.’’

“Europe is well on track to become the second largest battery cell producer in the world, behind China,’’ Šefčovič said.

He said that despite the disruption caused by the COVID-19 pandemic, 2020 would go down as the year of the electric vehicle (EV) in Europe, with EV sales reaching a record 1.04 million for a 10.5% market share, up from 3% in 2019.

EV’s sales in Europe are forecast by the battery industry to reach 7-8 million units by 2025 in response to Europe’s increasingly tough carbon emission standards and most tellingly, bans by individual nations on internal combustion engines taking effect within a 5-20 year range.

But Šefčovič also identified a key challenge for Europe to meet its battery independence ambitions – the need to develop capabilities in the sustainable sourcing and processing of battery materials (lithium, nickel, cobalt, manganese and others).

Taking lithium as an example, there is currently no production of battery grade material in Europe, despite the ambition to be 80% self-sufficient by 2025.

It is against that backdrop that the Perth-based European Metals Holdings (EMH) has found itself in the thick of things, with its hard rock Cinovec lithium project in the Czech Republic being rapidly advanced to become part of Europe’s battery materials solution.

EMH executive chairman Keith Coughlan said that there were both strategic and economic considerations behind Europe’s green push, and the establishment of a European battery industry ,

“Strategically, they are not going to throw hundreds of billions of Euros on a new industry and be reliant on China for any part of the supply chain.’’

“And it is not just about the recovery from COVID-19 which highlighted the need for local supply chains.’’

“It’s also about economic security as Europe needs to ensure it has jobs going forward because it takes a lot less people to build and service electric vehicles. They are also shutting down coal which is another big employer,’’ Coughlan said.

Cinovec is the fourth largest non-brine lithium deposit in the world and the biggest in Europe (as well as being a globally significant source of tin).

The mineral resource (indicated and inferred) contains a combined 7.22 million tonnes of lithium carbonate equivalent (LCE) and 263,000 tonnes of tin.

An initial probable ore reserve of 34.5 million tonnes of mineralisation has been declared to cover the first 20 years of mining at a rate of 22,500tpa of LCE.

The project is owned 49% by EMH and 51% by the integrated energy group CEZ, with CEZ about 70% owned by the Czech Republic.

CEZ’s power operations cover nine European countries covering nuclear, coal-fired power and green/renewable energy.

It is also the biggest operator of EV public charging stations in the Czech Republic and has partnerships with auto groups Skoda, Mercedes-Benz and Peugeot.

The entry of the Prague-based CEZ in Cinovec was first flagged in July 2019 and has involved an investment of €29.1 million into the project.

The CEZ investment means Cinovec is fully funded to a final investment decision in early 2022 after the completion of a definitive feasibility study.

It means Cinovec is on a pathway to becoming the first European Union producer of battery grade lithium compounds from a local lithium resource.

An updated preliminary feasibility study into Cinovec pointed to a post- tax Net Present Value of $US1.1 billion and an Internal Rate of Return of 28.8%, confirming the potential for the project to become low cost producer of battery grade lithium hydroxide, or battery grade lithium carbonate as markets demand.

The study work was based on an initial probable ore reserve of 34.5 million tonnes grading 0.65% lithium oxide and 0.09% tin, sufficient for the first 20 years of mining for minimum output of 25,267tpa of lithium hydroxide, or 22,500tpa of lithium carbonate.

The total resources stands at more than 695 million tonnes containing a JORC resource of 7.22 Mt LCE or about 65% of EU’s total hard rock lithium resource.

And unlike hard-rock lithium projects in Western Australia, Cinovec’s central Europe location means its infrastructure requirements are already well established, and its end-user markets are close by, both in the Czech Republic and surrounding EU nations.

The project’s location in the heart of Europe also gives it an advantage in the green credential rankings over hard-rock lithium projects in WA from a distance to market perspective.

In addition, the zinnwaldite concentrate produced from Cinovec requires only roasting compared with the calcination and roasting required for WA spodumene.

The project is expected to cost $US500 million, with a bankable supply offtake agreement(s) to underpin its financing. “Securing a bankable offtake agreement is one of the final critical steps we need to make, and hopefully that occurs in the relative short-term,’’ Coughlan said.

The building momentum for the project – and the marked recovery in lithium prices in the opening months of 2021 – was reflected in EMH’s well-supported $7.1 million placement in February (6.45 million CDI’s at an issue price of $1.10 each).

Thematica Future Mobility, a Luxembourg energy fund, took up $5 million of the placement.

“The strong growth in European EV sales and the rise of domestic battery cell production is going to require substantial lithium supply in the future,’’ Thematica said.

It added that it saw EMH as one of the first producers of battery grade lithium chemicals on the continent. And given the scale of Cinovec’s resource, the project would make a meaningful contribution to reaching the EU’s target of having 80% of its lithium requirements sourced locally.

Barry Fitzgerald

About Barry Fitzgerald

Barry Fitzgerald has covered the resources industry for 30 years. His column highlights the issues, opportunities and challenges for small and mid-cap resources stocks - most recently penned his column for The Australian newspaper and before that, The Age.

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