TIDMEMH
RNS Number : 8394H
European Metals Holdings Limited
27 March 2020
For immediate release
27 MARCH 2020
EUROPEAN METALS HOLDINGS LIMITED
FINAL AGREEMENT WITH CEZ TO MAKE SIGNIFICANT
INVESTMENT INTO CINOVEC PROJECT
European Metals Holdings Limited ("European Metals" or the
"Company") is pleased to announce that it has today reached final
agreement ("Final Agreement") with CEZ Group ("CEZ"), one of
Central and Eastern Europe's largest power utilities, regarding a
strategic partnership and significant investment into the Cinovec
Project ("Cinovec" or "the Project").
The Company announced on 20 November 2019 (" Potential Strategic
Partnership with CEZ and Significant Investment into Cinovec
Project") the terms of a conditional agreement ("Conditional
Agreement") with CEZ under which CEZ had the option to subscribe to
become a 51% shareholder in Geomet s.r.o. ("Geomet"), the Company's
Czech subsidiary and holder of the rights over the Project.
The Final Agreement reached today is now a binding commitment
from CEZ to subscribe to become a 51% shareholder in Geomet, and is
conditional only upon EMH shareholder approval, which will be
sought at an EGM to be held in April 2020.
The amended terms of the Final Agreement (as compared to the
Conditional Agreement) include:
(a) in the context of the binding commitment to invest described
above and current market conditions, a reduction of the price
payable by CEZ upon completing of the subscription of Geomet shares
from EUR34,061,265 to EUR29,100,000; and
(b) allowing CEZ to elect to withdraw from funding of the
Project at two separate milestones. The first withdrawal milestone
is designed to coincide with completion of the front-end
engineering design program and semi-industrial pilot testing of the
lithium concentrate processing while the second withdrawal
milestone is designed to coincide with completion of the definitive
feasibility study. If CEZ elects to withdraw, Geomet will return to
it an amount equal to its initial investment minus EUR250,000 and
all costs and expenses incurred in relation to the Project up until
the date of notification of the withdrawal. Following a withdrawal,
CEZ will reduce its holding on a pro-rata basis to a minority
position in Geomet.
The directors of the Company believe that the revised terms
provide sufficient funding for the next stage of the development of
the Project, setting it on sound footing to progress into
production thereafter.
Further details of the Final Agreement will be set out in the
supplementary circular to be posted to EMH shareholders
shortly.
European Metals Managing Director Keith Coughlan said, " We are
very pleased to have concluded this agreement with CEZ which,
subject only to EMH shareholder approval, provides certainty for
the future development of the Cinovec Project. Given the current
uncertain state of global markets, it is particularly affirming for
us to have a partner with the corporate, technical and financial
strength of CEZ investing in the Project."
Background to the Transaction
In July last year, EMH announced that CEZ was conducting due
diligence on the Company and the Cinovec Project, and that the
successful outcome of the due diligence process could result in CEZ
potentially becoming the Company's largest shareholder and
co-development partner for the Cinovec Project. Since then, EMH and
CEZ have held detailed discussions on the framework for CEZ's
participation in the Cinovec Project and in November 2019 EMH and
CEZ entered into the Conditional Agreement, pursuant to which CEZ
had the option to subscribe become a 51% shareholder in Geomet. The
Conditional Agreement included conditions precedent that have now
all been met.
In light of very significant changes in global markets and the
successful completion of CEZ's due diligence, EMH and CEZ have
replaced the Conditional Agreement with the Final Agreement.
The Company considers that CEZ Group is an ideal strategic and
financial partner for the Cinovec Project. In addition to CEZ's
financial strength, the Board believes that CEZ provides strong
strategic relationships within the Czech Republic, the European
Union and abroad. CEZ is a leader in power generation and
distribution in the region and has plans to become heavily involved
in the development of new energy systems. Through these battery
industry activities, CEZ is expected to assist greatly in the
securing of off take agreements for the Project.
Financial effects of the Transaction
The primary financial objective of the transaction is to secure
the funding for the next stage of the development of the Cinovec
Project and to provide a strong platform for the Cinovec Project to
progress into production. Whilst the Board believes from the
extensive PFS work undertaken to date that Cinovec is a robust
project with strong economics, the funding of large mining and
processing projects requiring significant capital expenditure is
very challenging for smaller mining companies in current economic
and market conditions.
The addition of a partner with the financial strength of CEZ,
and the strong significant business relationships that it brings,
significantly enhances the status of the Cinovec Project at this
important stage of its development.
The subscription proceeds from the Final Agreement will be used
by Geomet to develop the Cinovec Project through completion of the
Definitive Feasibility Study ("DFS"), complete all permitting
processes and advance the Cinovec Project to a construction
decision. The DFS will bring together the detailed operational and
financial implementation plan, including geological, technical,
engineering, metallurgical, environmental and financial technical
expert reports. The Company has prepared the detailed budget and
business plan for the delivery of the DFS, together with the
front-end engineering design programme, which is expected to take
up to 18 months to complete. In order to facilitate the timely
progressing of the DFS, Geomet will enter into a service contract
with one or more third party contractors and, under the Geomet
Shareholders' Agreement (to be entered into at the completion of
CEZ's investment), EMH will be appointed to provide services of
managing the Cinovec Project development.
On completion of CEZ's investment pursuant to the Final
Agreement, EMH's ongoing interest in Geomet will reduce to 49%.
Under the Geomet Shareholders' Agreement (to be entered into at the
completion of CEZ's investment), Geomet will have a board of five
directors. EMH will have the right to nominate two of the five
Geomet directors Further, under the Geomet Shareholders' Agreement,
EMH will be appointed to provide services managing the Cinovec
Project development
Accordingly, on completion of the Final Agreement, EMH will
cease to consolidate Geomet's results within the EMH's consolidated
accounts.
ASX Listing Rule 11.2
ASX Listing Rule 11.2 provides that an entity may not dispose of
its main undertaking (that is, its main asset or business) without
the approval of its shareholders. While the Final Agreement may be
considered to constitute the Company disposing of its main
undertaking, the Company will not be making any change to its main
undertaking. That is, the Company will remain engaged in the same
principal business activities following completion of the Final
Agreement. Accordingly, the Company will be seeking Shareholder
approval under Listing Rule 11.2 for completeness.
CEZ is not a related party of the Company, and Shareholder
approval for the Final Agreement is not required for the purposes
of ASX Listing Rule 10.1.
AIM Rule 15
The Final Agreement would constitute a fundamental change of
business of the Company under Rule 15 of the AIM Rules. The Final
Agreement is therefore conditional on, inter alia, Shareholder
approval which will be sought at a General Meeting of the Company
to be convened in due course. The Company will, however, as
previously announced, remain an operating minerals company under
the AIM Rules given its remaining material interest and ongoing
involvement in the Cinovec Project after the Final Agreement has
completed, as described above.
The completion of the Final Agreement will not result in any
changes to the Company's Board or management.
Further information
The Company expects to publish shortly a supplementary circular
to shareholders setting our further details of the amended proposed
subscription, the proposed amendments to the Exclusivity and
Framework Agreement and Geomet Shareholders' Agreement, together
with notice of the General Meeting. A further announcement will be
made in due course.
BACKGROUND INFORMATION ON CEZ
Headquartered in the Czech Republic, CEZ is an established,
integrated energy group with operations in a number of Central and
Southeastern European countries and Turkey. CEZ's core business is
the generation, distribution, trade in, and sales of electricity
and heat, trade in and sales of natural gas, and coal extraction.
CEZ Group has 33,000 employees and annual revenue of approximately
EUR 7.24 billion.
The largest shareholder of its parent company, CEZ a. s., is the
Czech Republic with a stake of approximately 70%. The shares of CEZ
a.s. are traded on the Prague and Warsaw stock exchanges and
included in the PX and WIG-CEE exchange indices. CEZ's market
capitalization is approximately EUR 10.08 billion.
As one of the leading Central European power companies, CEZ
intends to develop several projects in areas of energy storage and
battery manufacturing in the Czech Republic and in Central
Europe.
CEZ is also a market leader for E-mobility in the region and has
installed and operates a network of EV charging stations throughout
Czech Republic. The automotive industry in Czech is a significant
contributor to GDP and the number of EV's in the country is
expected to grow significantly in coming years.
BACKGROUND INFORMATION ON CINOVEC
PROJECT OVERVIEW
Cinovec Lithium/Tin Project
European Metals, through its wholly owned subsidiary, Geomet
s.r.o., controls the mineral exploration licenses awarded by the
Czech State over the Cinovec Lithium/Tin Project. Cinovec hosts a
globally significant hard rock lithium deposit with a total
Indicated Mineral Resource of 372.4Mt at 0.45% Li(2) O and 0.04% Sn
and an Inferred Mineral Resource of 323.5Mt at 0.39% Li(2) O and
0.04% Sn containing a combined 7.22 million tonnes Lithium
Carbonate Equivalent and 263kt of tin reported 28 November 2017
(Further Increase in Indicated Resource at Cinovec South). An
initial Probable Ore Reserve of 34.5Mt at 0.65% Li(2) O 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 reported 11 July
2018 (Cinovec Production Modelled to Increase to 22,500tpa of
Lithium Carbonate).
This makes Cinovec the largest 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 June 2019 EMH completed an updated Preliminary Feasibility
Study, conducted by specialist independent consultants, which
indicated a return post tax NPV of USD1.108B and an IRR of 28.8%
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.
COMPETENT PERSON
Information in this release that relates to exploration results
is based on information compiled by Dr Pavel Reichl. Dr Reichl is a
Certified Professional Geologist (certified by the American
Institute of Professional Geologists), a member of the American
Institute of Professional Geologists, a Fellow of the Society of
Economic Geologists and is a Competent Person as defined in the
2012 edition of the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves and a Qualified Person
for the purposes of the AIM Guidance Note on Mining and Oil &
Gas Companies dated June 2009. Dr Reichl consents to the inclusion
in the release of the matters based on his information in the form
and context in which it appears. Dr Reichl holds CDIs in European
Metals.
The information in this release that relates to Mineral
Resources and Exploration Targets has been compiled by Mr Lynn
Widenbar. Mr Widenbar, who is a Member of the Australasian
Institute of Mining and Metallurgy, is a full time employee of
Widenbar and Associates and produced the estimate based on data and
geological information supplied by European Metals. Mr Widenbar has
sufficient experience that is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity that he is undertaking to qualify as a Competent Person as
defined in the JORC Code 2012 Edition of the Australasian Code for
Reporting of Exploration Results, Minerals Resources and Ore
Reserves. Mr Widenbar consents to the inclusion in this report of
the matters based on his information in the form and context that
the information appears.
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.
LITHIUM CLASSIFICATION AND CONVERSION FACTORS
Lithium grades are normally presented in percentages or parts
per million (ppm). Grades of deposits are also expressed as lithium
compounds in percentages, for example as a percent lithium oxide
(Li(2) O) content or percent lithium carbonate (Li (2) CO (3) )
content.
Lithium carbonate equivalent (" LCE ") is the industry standard
terminology for, and is equivalent to, Li (2) CO (3) . Use of LCE
is to provide data comparable with industry reports and is the
total equivalent amount of lithium carbonate, assuming the lithium
content in the deposit is converted to lithium carbonate, using the
conversion rates in the table included below to get an equivalent
Li (2) CO (3) value in percent. Use of LCE assumes 100% recovery
and no process losses in the extraction of Li (2) CO (3) from the
deposit.
Lithium resources and reserves are usually presented in tonnes
of LCE or Li.
The standard conversion factors are set out in the table
below:
Table: Conversion Factors for Lithium Compounds and Minerals
Convert from Convert to Convert to Convert to Li(2)
Li Li(2) O CO(3)
------------------- ----------- ----------- ----------- -----------------
Lithium Li 1.000 2.153 5.324
Li(2)
Lithium Oxide O 0.464 1.000 2.473
Li(2)
Lithium Carbonate CO3 0.188 0.404 1.000
LiOH.H(2)
Lithium Hydroxide O 0.165 0.356 0.880
------------------- ----------- ----------- ----------- -----------------
WEBSITE
A copy of this announcement is available from the Company's
website at www.europeanmet.com.
ENQUIRIES:
European Metals Holdings Limited Tel: +61 (0) 419 996 333
Keith Coughlan, Managing Director Email: keith@europeanmet.com
Kiran Morzaria, Non-Executive Tel: +44 (0) 20 7440 0647
Director Tel: +61 (0) 8 6245 2050
Julia Beckett, Company Secretary Email: julia@europeanmet.com
Beaumont Cornish (Nomad & Tel: +44 (0) 20 7628 3396
Broker) Email: corpfin@b-cornish.co.uk
Michael Cornish
Roland Cornish
Shard Capital (Joint Broker) Tel: +44 (0) 20 7186 9950
Damon Health
Erik Woolgar
Blytheweigh (Financial PR) Tel: +44 (0) 20 7138 3222
Tim Blythe
Megan Ray
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, Managing Director.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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