PFS update rerates European Metal’s Cinovec Lithium/Tin Project

Within its quarterly activities report, released 31 January, lithium junior European Metals Holdings (ASX: EMH) announced that an update to the 2019 Preliminary Feasibility Study (PFS) had delivered a 75% increase in the company’s Cinovec Lithium/Tin Project in the Czech Republic.

The 2022 PFS update shows a net present value (NPV) of US$1.938bn, an increase of 74.9%, based upon a lithium hydroxide price of US$17,000 per tonne, which is significantly less than the current price.

There’s also an up-front capital cost of US$644m; and an increase in the overall annual production of battery-grade lithium hydroxide to 29,386 tpa, an increase of 16%.

In addition, the post-tax internal rate of return (IRR) also increased to 36.3%.

To the uninitiated, the Cinovec lithium-tin project, a high-grade underground deposit located in Prague, is the biggest lithium deposit in Europe and one of the biggest tin resources being developed in the world.

The project is within a historic mining region, with artisanal mining dating back to the 1300s.

The contained lithium in the resource increased from 7.2 Mt to 7.39 Mt LCE (see table below).

Capital raising

To assist in further development of the Cinovec Project and provide general working capital, the company recently received firm commitments from two institutional clients of Euroz Hartleys for a private placement of approximately $14.4m.

The issue price of $1.40 represents a 0.7% premium to the traded price on 18 January 2022.

Commenting on recent developments Keith Coughlan, Executive Chairman, said:

“As we progress Cinovec towards production, further de-risking the project in the process, we are optimistic that shareholders will be rewarded as the value differential between our market cap and the project’s NPV reduces,” said Coughlan.

“With increasing demand for electric vehicles and the expected demands of grid storage capacity, the project is very well placed to supply the European lithium market for many decades.”

The share price was up 1.20% at the close today.

Consensus does not cover this stock.

Based on Morningstar's fair value of $1.94, the stock appears to be undervalued.