European Metals Holdings: PFS Update Delivers Outstanding Results
- 75% Increase in Cinovec NPV to US$1.94b
- 16% Increase in Production to 29,386tpa
HIGHLIGHTS
- The 2019 PFS Update for the Cinovec Project has been updated to demonstrate the effect of changes in the mining process to incorporate the use of paste backfill, which results in an increase in annual production, together with changes in lithium and by-product prices to reflect current and expected market conditions.
- Annual production of battery grade lithium hydroxide monohydrate modelled to increase from 25,267 tpa to 29,386 tpa, an increase of 16%.
- NPV8 (post tax) increases from US$1.108B to US$1.938B, an increase of 74.9%, based upon a lithium hydroxide price of USD17,000 per tonne which is significantly less than the current price.
- Post tax IRR of 36.3% and a payback period of 2.5 years from the commencement of production.
- Up-front capital cost due to backfilling plant and additional capital costs to produce 29,386 tpa lithium hydroxide increased to US$644m.
- This 2022 PFS Update assumes the life of mine extraction of 13.1% of the Measured and Indicated JORC Resources at Cinovec.
- Use of tailings for backfill will result in a far smaller environmental impact, further enhancing the Project’s already strong ESG credentials.
European Metals Holdings Limited (EMH or the Company) (ASX & AIM: EMH, OTC - Nasdaq Intl ADS: EMHXY) is pleased to announce the results of the mining update to the 2019 Pre-Feasibility Study (2022 PFS Update), led by mining definitive feasibility study (DFS) consultant Bara Consulting, on the backfilling potential of the Cinovec mine, in which it has a 49% economic interest, in the Czech Republic.
The study updates the outcomes of the previously updated pre-feasibility study announced on 17 June 2019 (2019 PFS Update), for changes in the mining process as well as an increase in annual production and changes in lithium and by-product prices.
As a result of the conclusions of the study, Geomet s.r.o. (Geomet) has changed the planned mining method for the Cinovec orebody from open stoping to longhole stoping with backfill using paste backfill. This change, together with other changes to the material assumptions outlined in this update, increases the Cinovec mine’s proposed ore extraction from 34.5mt up to 54.5mt, enabling an increase in the annual processing rate by approximately 33% per annum over the previous 21-year life of mine, from 1.69mtpa to 2.25mtpa over a now 25-year life of mine.
Keith Coughlan, Executive Chairman, said “I am very pleased to report to shareholders on the completion of this 2022 PFS Update for the Cinovec Project which adds significantly to the already robust forecast economics for the project. The results of the study are very positive for the overall economics, resulting in a far greater amount of the ore resource being utilised for production of lithium and increasing the after tax NPV8 from USD1.1B to USD1.94B. The increased NPV assumes a long-term price for lithium hydroxide of US$17,000 per tonne. An increase in the lithium hydroxide price by 30% to USD 22,100 would increase the NPV8 (post tax) to over USD 3B (refer to figure 13 on page 25). Given the current price of lithium hydroxide is in the vicinity of USD 40,000 per tonne it is clear that that the Cinovec Project will be critical to European battery self-sufficiency.
“The use of approximately 54% of the plant tailings for backfill will result in a far smaller environmental impact, with much smaller dry stack tailings storage required, further enhancing the already strong ESG credentials of the Project.
“The significant increase in lithium produced will further add to the supply security of the European battery industry. Importantly, even at this increased production rate, the resource is nowhere near fully utilised – paving the way for future assessment of further production increases.
“Cinovec is strategically located in central Europe, in close proximity to the continent’s vehicle manufacturers. 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 Cinovec Project remains a potential low operating cost lithium hydroxide producer, due to a number of key advantages:
- By-product credits from the recovery of tin, tungsten and potash;
- Paramagnetic properties of zinnwaldite allow the use of low-cost wet magnetic processing to produce a lithium concentrate for further processing at relatively high recoveries;
- Relatively low temperature roasting at atmospheric pressure utilizing conventional technologies, reagent recycling and the use of waste gypsum from power stations;
- Low-cost access to extensive existing infrastructure and cost-effective grid power;
- Global warming potential (GWP) impact mitigation planning recently identified solar power, battery-electric mining fleet, Hypex Bio explosives and the potential use of green hydrogen for thermal energy which could make Cinovec’s lithium chemicals have some of the lowest CO2 intensity in the world if all impact mitigation strategies are pursued.
- Highly skilled workforce and comparatively low costs of employment;
- Historic mining and chemical plant region – strong support by the local community for job creation in areas that have both historic and current mining and chemicals operations;
- The deposit lies in a stable jurisdiction, located centrally to the rapidly expanding electric vehicle industry, which is forecast to be the main driver behind increasing lithium consumption; and
- Established and transparent mining code.
CINOVEC PROJECT OVERVIEW
The Cinovec Project is located in the Krusne Hory Mountains which straddle the border between the Czech Republic and the Saxony State of Germany and comprises the Cinovec mine and nearby brownfield land upon which the lithium production facilities will be built. The project is within a historic mining region, with artisanal mining dating back to the 1300s.
In the 1940s a large underground mining operation was established primarily to produce tungsten for the war effort. Mining and processing activities continued under the Czechoslovakian Government with the mine continuing to expand and producing tin as well as tungsten. Due to the fall of communism and lower tin prices, the mine was closed in 1993. In 2011, the old processing plant was removed and the site rehabilitated.
In 2014, EMH commenced a drilling campaign to validate the comprehensive data generated by the earlier exploration activities. The Company’s on-going drilling programme had completed 26 diamond holes for a total of 9,477m drilled by 2017, successfully validating earlier drilling results, adding lithium grade data and providing metallurgical test-work samples.
In 2015, EMH completed a Scoping Study for the Cinovec Project (2015 Scoping Study). The 2015 Scoping Study highlighted that the size, grade and location of the deposit made it a very attractive development opportunity and recommended that the project proceed through to a preliminary feasibility study.
A trade-off study was completed in November 2016 comparing the operating and capital costs of the conventional sodium-sulphate roast and the L-Max process. It was concluded that conventional roasting technology would deliver high lithium recoveries with a lower operating cost, lower technical risk, less impurity removal, and be less dependent on potassium by-product credits. The Company then selected the sodium-sulphate roasting option as the preferred method of lithium extraction for the 2017 PFS.
The 2017 Prefeasibility Study (2017 PFS) (refer to the Company’s ASX release dated 19 April 2017) highlighted that Cinovec could be a low-cost producer of lithium carbonate via conventional roasting technology used at atmospheric pressure. The 2017 PFS estimated average production of 20,800 tpa of lithium carbonate at a cost of $3,843/t. The PFS showed a NPV of $540M (post tax 8%) and a capital cost of $393M.
The updates to the pre-feasibility study announced on 17 June 2019 (2019 PFS Update) (refer to the Company’s ASX release dated 17 June 2019) highlighted that Cinovec could be an economically robust producer of lithium hydroxide and estimated annual production of 25,267 tpa battery grade lithium hydroxide at a cost of $3,435/tonne LiOH.H2O. The 2019 PFS Update showed a NPV of US$1.108B (post tax, 8%) and a capital cost of $482.6M.
This 2022 PFS Update highlights the very strong increase in value which results from the increase in the price of battery grade lithium hydroxide when combined with the use of backfill and an increase in the overall annual production of battery grade lithium hydroxide to 29,386 tpa. This 2022 PFS Update shows an NPV of $1.938B (post tax, 8%) and an up-front capital cost of US$644M.
Cinovec is centrally located for European end-users and is well serviced by infrastructure, with a sealed road adjacent to the deposit, rail lines located 5 km north and 8 km south of the deposit and an active 22 kV transmission line running to the historic mine. As the deposit lies in an active mining region, it has strong community support.
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BACKGROUND INFORMATION ON CINOVEC
Cinovec Lithium/Tin Project
Geomet s.r.o. controls the mineral exploration licenses awarded by the Czech State over the Cinovec Lithium/Tin Project. Geomet has been granted a preliminary mining permit by the Ministry of Environment and the Ministry of Industry. The company is owned 49% by EMH and 51% by CEZ a.s. through its wholly owned subsidiary, SDAS. Cinovec hosts a globally significant hard rock lithium deposit with a total Measured Mineral Resource of 53.3Mt at 0.47% Li2O and 0.08% Sn, Indicated Mineral Resource of 361.9Mt at 0.45% Li2O and 0.04% Sn and an Inferred Mineral Resource of 295Mt at 0.39% Li2O and 0.04% Sn containing a combined 7.39 million tonnes Lithium Carbonate Equivalent and 263kt of tin (refer to the Company’s ASX release dated 13 October 2021) (Resource Upgrade at Cinovec Lithium Project).
An initial Probable Ore Reserve of 34.5Mt at 0.65% Li2O and 0.09% Sn reported 4 July 2017 (Cinovec Maiden Ore Reserve – Further Information) has been declared to cover the first 20 years mining at an output of 22,500tpa of lithium carbonate (refer to the Company’s ASX release dated 11 July 2018) (Cinovec Production Modelled to Increase to 22,500tpa of Lithium Carbonate).
This makes Cinovec the largest hard rock lithium deposit in Europe, the fourth largest non-brine deposit in the world and a globally significant tin resource.
The deposit has previously had over 400,000 tonnes of ore mined as a trial sub-level open stope underground mining operation.
In this ASX Release, EMH provides an update to the 2019 PFS Update, conducted by specialist independent consultants, which indicates a return post tax NPV of USD1.938B and a post tax IRR of 36.3% and confirmed that the Cinovec Project is a potential low operating cost, producer of battery grade lithium hydroxide or battery grade lithium carbonate as markets demand. It confirmed the deposit is amenable to bulk underground mining. Metallurgical test-work has produced both battery grade lithium hydroxide and battery grade lithium carbonate in addition to high-grade tin concentrate at excellent recoveries. Cinovec is centrally located for European end-users and is well serviced by infrastructure, with a sealed road adjacent to the deposit, rail lines located 5 km north and 8 km south of the deposit and an active 22 kV transmission line running to the historic mine. As the deposit lies in an active mining region, it has strong community support.
The economic viability of Cinovec has been enhanced by the recent strong increase in demand for lithium globally, and within Europe specifically.
There are no other material changes to the original information and all the material assumptions continue to apply to the forecasts.
CONTACT
For further information on this update or the Company generally, please visit our website at www.europeanmet.com or see full contact details at the end of this release.
ENQUIRIES:
European Metals Holdings Limited
Keith Coughlan, Executive Chairman
Tel: +61 (0) 419 996 333
Email: [email protected]
Kiran Morzaria, Non-Executive Director
Tel: +44 (0) 20 7440 0647
Dennis Wilkins, Company Secretary
Tel: +61 (0) 417 945 049
Email: [email protected]
WH Ireland Ltd (Nomad & Joint Broker)
James Joyce/ Darshan Patel
(Corporate Finance)
Harry Ansell/Jasper Berry (Broking)
Tel: +44 (0) 20 7220 1666
Shard Capital (Joint Broker)
Damon Heath
Erik Woolgar
Tel: +44 (0) 20 7186 9950
Blytheweigh (Financial PR)
Tim Blythe
Megan Ray
Tel: +44 (0) 20 7138 3222
Chapter 1 Advisors (Financial PR – Aus)
David Tasker
Tel: +61 (0) 433 112 936
The information contained within this announcement is considered to be inside information, for the purposes of Article 7 of EU Regulation 596/2014, prior to its release. The person who authorised for the release of this announcement on behalf of the Company was Keith Coughlan, Executive Chairman.
CAUTION REGARDING FORWARD LOOKING STATEMENTS
Information included in this release constitutes forward-looking statements. Often, but not always, forward looking statements can generally be identified by the use of forward looking words such as “may”, “will”, “expect”, “intend”, “plan”, “estimate”, “anticipate”, “continue”, and “guidance”, or other similar words and may include, without limitation, statements regarding plans, strategies and objectives of management, anticipated production or construction commencement dates and expected costs or production outputs.
Forward looking statements inherently involve known and unknown risks, uncertainties and other factors that may cause the company’s actual results, performance and achievements to differ materially from any future results, performance or achievements. Relevant factors may include, but are not limited to, changes in commodity prices, foreign exchange fluctuations and general economic conditions, increased costs and demand for production inputs, the speculative nature of exploration and project development, including the risks of obtaining necessary licences and permits and diminishing quantities or grades of reserves, political and social risks, changes to the regulatory framework within which the company operates or may in the future operate, environmental conditions including extreme weather conditions, recruitment and retention of personnel, industrial relations issues and litigation.
Forward looking statements are based on the company and its management’s good faith assumptions relating to the financial, market, regulatory and other relevant environments that will exist and affect the company’s business and operations in the future. The company does not give any assurance that the assumptions on which forward looking statements are based will prove to be correct, or that the company’s business or operations will not be affected in any material manner by these or other factors not foreseen or foreseeable by the company or management or beyond the company’s control.
Although the Company attempts and has attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in forward looking statements, there may be other factors that could cause actual results, performance, achievements or events not to be as anticipated, estimated or intended, and many events are beyond the reasonable control of the company. Accordingly, readers are cautioned not to place undue reliance on forward looking statements. Forward looking statements in these materials speak only at the date of issue. Subject to any continuing obligations under applicable law or any relevant stock exchange listing rules, in providing this information the company does not undertake any obligation to publicly update or revise any of the forward looking statements or to advise of any change in events, conditions or circumstances on which any such statement is based.
This announcement has been prepared in compliance with the JORC Code 2012 Edition and the current ASX Listing Rules.
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