Dual-listed European Metals and Czech power utility CEZ Group have reached a conditional agreement regarding a potential strategic partnership and significant investment into the Cinovec project, in the Czech Republic.

Upon the expected conclusion of the agreement by early 2020, CEZ will become a 51% shareholder in Geomet, European Metals Czech subsidiary and holder of the rights over the project for about €34-million.

The agreement, which is currently still subject to the successful completion of due diligence, shareholder and other approvals, will result in Cinovec being fully-funded through to a construction decision and will assist in the integration of Cinovec into the European market.

European Metals has been developing the Cinovec project for about five-and-a-half years. It is considered to have a large lithium resource following its history as a tin mine, European Metals MD Keith Coughlan said in an interview on Wednesday.

Cinovec, which currently has a 21-year mine life, has the ability to produce either or both the main battery compounds – lithium carbonate or lithium hydroxide – at the bottom end of the global cost curve.

Coughlan said the agreement with CEZ showed European Metals’ commitment to develop the Cinovec project, in conjunction with the Czech industry, for the benefit of the country’s involvement in the battery and electric vehicle (EV) industries.

Speaking to Mining Weekly Online on Wednesday, Coughlan explained that the demand growth for lithium in Europe was expected to outpace that of the rest of the world over the next few years, owing to the ambitions of car manufacturers to build a significant number of EVs in the European Union.

With no local supply of the battery compounds in the region, he said that demand would increase “dramatically”, presenting an opportunity for the European Metals to take advantage of the “groundswell of political and financial support” to provide the materials needed.

European Metals is in offtake discussions and Coughlan said that bringing CEZ on board would give potential buyers “the confidence that the project will be completed”.

The next steps for the company would be detailed engineering for the project, and to complete the formal feasibility study, followed by the bankable stage. This is expected to take about 18 months, towards mid-2021.

Following this, a two-year construction period will start at Cinovec, with the plant operational by the middle of 2023.

This timeline, Coughlan tells Mining Weekly Online, “fits in quite well” with the demand for lithium in Europe, from battery and EV manufacturers’ point of view about the current state of the roll-out plans.

Once operational, Cinovec will produce about 25 000 t/y of battery-grade lithium hydroxide, or slightly less if the project ends up producing only lithium carbonate in Phase 1.

Over its mine life, European will use less than 10% of the overall resource at Cinovec if it upholds this rate of production.

European Metals has the ability to produce more, Coughlan points out, but says that this will hinge on funding and the right offtake partners and agreements.

The company traded 2% up at 22p a share on the London bourse.