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European Metals Holdings (ASX: EMH) expects continued strength for lithium

Tue 08 Mar 22, 5:41pm (AEST)

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KEY POINTS

  • 0:49 Lithium price
  • 2:20 Lithium future
  • 2:57 ESG compliance
  • 5:40 6-month pipeline
  • 0:16 Company background

Transcript

Neesha:

Welcome back to Market Index. Today, we're very pleased to be joined by Keith Coughlan, CEO of European Metals Holdings. Welcome.

Keith Coughlan:

Thanks, Neesha.

Neesha:

For the listeners not familiar with European Metal Holdings, can you provide a little background on the company for us?

Keith Coughlan:

So European Metals is developing the Cinovec project, which is the largest hard rock lithium resource in Europe. It's a very, very big deposit over 7.4 million tons of lithium carbonate equivalent. It's in the Czech Republic on that country's border with Germany. We will be in production in 2024 at the right time for Europe as the increase in demand for electric vehicles in that part of the world kicks up significantly.

Neesha:

European Metal's primary activity is the development of lithium and tin project in the Czech Republic with lithium prices at an all time high, where do you see the price going from here?

Keith Coughlan:

Well, you're right. They are at an all time high and that's because of their supply demand equation that we're seeing globally. And obviously the demand for lithium is coming from the battery industry, which in turn the demand there is coming from the electric vehicle industry. And if we look at the forecast rates of production of electric vehicles into the future, there's no decrease. In fact, there's a significant increase in the forecast numbers of electric vehicles that are going to be produced globally, particularly in Europe, in the EU. And so for that reason, the demand for lithium is not going to drop anytime soon. The metals in deficit, that is the demand is greater than the supply. And I think it'll remain in deficit for some years yet.

Keith Coughlan:

Sure, these high prices will bring on more production, but it takes time. And none of the production forecasts mean that the metal's going to go out of deficit anytime soon. So I see continued high prices. We're seeing very high prices. If you look at what we call spot, the spot prices primarily in China. It's important to understand that a lot of the large volume long contracts for lithium products, lithium chemicals are actually set at prices a little lower than that, but they are still very high prices relative to where the metal has been historically.

Neesha:

With electrical vehicles becoming increasingly popular, can you ever foresee a situation where a lithium price could fall back down to last year's levels?

Keith Coughlan:

I can't personally see that as I say, more, more supply will come on, but it's a matter of how quickly that can come on and whether it can keep pace with the increase in demand for electric vehicles. There's no indication that's the case currently. So we may certainly see lithium price stabilize a little, even ease a little from these very high spot prices, but I can't see a time any anytime soon where we're going to see it back to the prices we saw last year.

Neesha:

Mining for battery metals has a bit of a bad reputation amongst environmentalists. And this creates an interesting dilemma. Europe wants to reduce its CO2 emissions, but in order to achieve this, they need to increase mining for battery metals. What are lithium companies doing to improve their ESG standing?

Keith Coughlan:

Well, I think it's fair to say that all mining is being focused on by environmental groups and really that's only the tip of the iceberg, but the whole industry is very, very focused now on the ESG, environmental, social governance, credentials of every mining project everywhere in the world. And you mentioned Europe, it is true. Europe is pushing very hard to reduce CO2 emissions. And, but the world understands that it's no longer viable to simply buy metals from other parts of the world. It's no longer viable to just move the perceived problem to Africa, for example. It's still the same issue. It is a global issue, not a regional issue. And that's, that's part of the reason why we're moving away from fossil fuels, moving towards green energy. But there's a transition period. There's no doubt. And we do have to mine to produce these metals to enable that transition. So you're right, there is a dilemma.

Keith Coughlan:

What's happening to counter that is that there's a very, very strong focus on ESG globally, on all of the yard sticks that all companies are measured by not just the mining companies, but the companies per reducing the batteries and the companies producing the electric vehicles. We at European Metals in the Cinovec project, we're very fortunate. We are reentering a historic underground mine. So that has a significantly low impact on the environment, on the community, the [inaudible 00:04:38] community in the vicinity, because we're not looking to break new ground. We're not looking to dig a big open pit. So we have an advantage from that point of view.

Keith Coughlan:

We also have an advantage in that our project is very close to the end users. So we don't have to transport material great distances. A lot of lithium that goes to Europe now comes two thirds of the way around the world from Australia. Obviously we're not going to have that sort of issue. So the world is addressing the issues of environmental impact, the CO2 footprint, the use of water, the acidification of projects and processes. Happily our credentials in all of those respects have been very good, but the world will come to a balance, I believe, on enabling these projects to get into production whilst ensuring that the ESG impact is as low as possible.

Neesha:

Keith, what's the six month pipeline looking like for European Metals' group?

Keith Coughlan:

So in terms of our news flow, we usually break this into two categories. Firstly, we have our definitive feasibility study running, which will conclude later this year. And so from time to time, we'll have updates about how that process is tracking various test work that we'll do, lifecycle test work, pilot plant work, et cetera, cetera, et cetera. But above and beyond that, it's the strategic and corporate sort of activities that we're embarking on. Our key plan, we need to get this project funded and have that funding equation sorted by the end of the year. So that involve to discussions with European banks, with European grant schemes, but also with off-takers. for a lithium project in order to get funded, you need to have bankable off-take as the market has moved in our favor, the last six to 12 months, those off-take discussions are improving and it's a key area for us over the next six months as well.

Neesha:

Keith Coughlan, CEO of European Metals group. Thank you for joining us on Market Index, much appreciated.

Keith Coughlan:

Thank you. Thanks for your time.

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DISCLAIMER: Market Index helps small-cap ASX listed companies connect with Australian investors through clear and concise articles on key developments. European Metals Holdings Ltd was a client at the time of publishing. All coverage contains factual information only and should not be interpreted as an opinion or financial advice. Consider consulting a qualified financial adviser before making an investment decision.

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Market Index Corporate

Tue 08 Mar 22, 5:41pm (AEST)

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