European Metals’ lithium production looking lean and green
4 minute read
In a development that has triggered a near 10% share price uptick, European Metals Holdings Limited (ASX&AIM: EMH; NASDAQ: ERPNF) has engaged Minviro, a UK-based and globally recognised sustainability and life cycle assessment consultancy to provide an ISO compliant life cycle assessment (LCA), including a carbon footprint evaluation, of the Cinovec lithium/tin project in the Czech Republic.
Tin is certainly in the news at the moment with the price increasing to US$31,255 after reaching a 10-year high on Tuesday.
While lithium carbonate and lithium hydroxide monohydrate will be the commodities produced by European Metals, credits from the production of tin are important in terms of driving down costs of production and earlier modelling was based on a tin price well below the current spot price.
In June 2019, European Metals released the results from the update of the process flowsheet previously developed to enable the production of lithium hydroxide (LiOH.H2O).
This represented an update to the 2017 prefeasibility study (PFS) that applied a tin price assumption of US$22,000 per tonne, which based on back of the envelope figures is at the midpoint of the metal’s low and high price range (circa US$15,000 - US$30,000) over the last 10 years.
On that note, the headline PFS numbers that support the Cinovec Project are a post-tax Net Present Value (NPV) return of nearly US$1.2 billion, and an Internal Rate of Return (IRR) of 28.8% for the project.
The PFS was based on an assumed battery grade lithium hydroxide price of $12,000/tonne.
EMH’s production will sit in the bottom half of the cost curve, a key competitive advantage that can, to a fair degree, be attributed to the value of tin credits.
The deposit contains a combined 7.22 million tonnes of Lithium Carbonate Equivalent and 263,000 tonnes of tin, which particularly at current prices makes the value of tin in ground a very valuable resource.
As the following tradingeconomics.com 50 year chart shows, if tin breaks above the US$32,000 per tonne mark it could well set an all-time record, effectively providing strong share price support for companies with exposure to the metal.
Multiple dynamics in play in terms of tin price support
Tin producer Malaysia Smelting Corporation (MSC) said it had suspended operations and declared force majeure on deliveries, providing upward momentum for the tin price.
It was just back in February that Bloomberg reported that the London tin market was facing the biggest supply squeeze in at least three decades as dwindling inventories, robust industrial demand and rising investor interest boost spot prices.
Consequently, the spike in the commodity price isn’t just attributable to MSC events, but potentially increased demand from industrial users.
Leading this increased demand has been the rush for high-end computer chips.
On this note, Bloomberg reported Geordie Wilkes, head of research at Sucden Financial as saying, “Exports and production of semi-conductors suggest solder demand had a very strong year, and it looks like that could continue, but unfortunately the supply side is lagging.”
LCAs to be produced for both lithium carbonate and hydroxide
Harking back to European Metals news regarding the appointment of an LCA consultancy, is an important step for the group as assessments will be produced for both battery-grade lithium carbonate and battery-grade lithium hydroxide monohydrate which will be manufactured at a lithium chemical plant nearby to the Cinovec mine.
Life Cycle Assessment is a widely accepted and robust numerical method used to quantify climate change and other environmental impacts for industrial processes, while identifying opportunities for impact reduction and process improvement.
Cinovec LCAs will be benchmarked against global lithium peers, allowing investors to assess their investment options in the sector.
Not just low-cost, but low carbon
This could well work in favour of European Metals as Minviro will be actively engaged to identify low-carbon optimisations in the developing feasibility study for Cinovec.
Cinovec LCAs are expected to demonstrate strong carbon footprint credentials with lower energy use, less intensive reagent application and net carbon credits from mine and process by-products.
The report is anticipated to be completed by the September quarter of 2021.
The International Organisation for Standardisation (ISO) has a set of standards published on Life Cycle Assessment (‘LCA’) (ISO 14040 and 14044).
The standards outline the best practice requirements and principles to be undertaken for a LCA study.
ISO compliance includes a third-party review by an independent panel of experts, and the results are then allowed to be disclosed publicly and used for comparison with different primary production methods of raw materials.
This will provide the Cinovec Project with an independently-verified carbon assessment that is recognised by financiers and potential off-takers.