European Metals Holdings  ASX:EMH

Company

Current Price

Initial Coverage

Date

Price

Initial Entry Price

Returns from Initial Entry

$ 0.665

03-Mar-21

$ 1.400

$ 1.100

-40%

Report Date Price Current Return
EMH is Leading the Pack to be the First Local EU Lithium Producer 03-Mar-21 $1.400 -53%
We Just Invested in This ASX Stock – Here is Our Initiation Report 03-Mar-21 $1.400 -53%
In 72 hours Volkswagen will make an Electric Announcement 12-Mar-21 $1.600 -58%
4 Key Takeaways from VW’s Power Day 16-Mar-21 $1.800 -63%
How Our Investments Performed in Q1 of 2021 21-Apr-21 $1.440 -54%
Rumours of New Battery Factory 64km away from ASX: EMH 03-Jun-21 $1.310 -49%
G7 Summit: Countries to Switch To Electric Vehicles 11-Jun-21 $1.63 -59%
Czech government announces support for electric car gigafactory – 64km away from EMH’s lithium project 28-Jul-21 $1.480 -55%
Lithium Boom: EMH offtake surely coming soon? 11-Aug-21 $1.610 -59%
EMH Upgrades its EU Lithium Resource as Lithium Prices Continue to Soar 14-Oct-21 $1.395 -52%
What have our portfolio companies been doing? (Part 1) 10-Nov-21 $1.500 -56%
EMH Life Cycle Study Paves Way for Low Carbon Lithium 24-Nov-21 $1.470 -55%
EMH Raises $14M and Edges Closer to Lithium Production 20-Jan-22 $1.625 -59%

ASX:EMH

Returns from Initial Entry

-40%

Current Price

$ 0.665

First Coverage

03-Mar-21

$ 1.400

Initial Entry Price

$ 1.100

Returns from Initial Entry

-40%

Past Coverage
EMH is Leading the Pack to be the First Local EU Lithium Producer
We Just Invested in This ASX Stock – Here is Our Initiation Report
In 72 hours Volkswagen will make an Electric Announcement
4 Key Takeaways from VW’s Power Day
How Our Investments Performed in Q1 of 2021
Rumours of New Battery Factory 64km away from ASX: EMH
G7 Summit: Countries to Switch To Electric Vehicles
Czech government announces support for electric car gigafactory – 64km away from EMH’s lithium project
Lithium Boom: EMH offtake surely coming soon?
EMH Upgrades its EU Lithium Resource as Lithium Prices Continue to Soar
What have our portfolio companies been doing? (Part 1)
EMH Life Cycle Study Paves Way for Low Carbon Lithium
EMH Raises $14M and Edges Closer to Lithium Production

Overview

Investment Memo: European Metal Holdings (ASX:EMH)

What we want to see from our investment in EMH during 2022

20th Jan 2022

This investment memo is a short, high level summary of why we continue to hold EMH and what we expect the company to deliver in 2022. The purpose is to record our current thinking as a benchmark to assess the company’s performance against our expectations 12 months from now.  For our detailed commentary on our investment in EMH click here.

What does EMH do?

European Metals Holding (ASX: EMH) is developing the largest hard rock lithium resource inside the European Union.

Located in the Czech Republic on the border with battery metal hungry Germany, EMH’s project is well advanced and is moving towards becoming the first local EU battery grade lithium producer to deliver to an emerging local industry.

What is the macro theme behind EMH?

The EU is rapidly switching from fossil fuel powered transportation to Electric Vehicles (EVs), as part of the “European Green Deal” which should make Europe carbon neutral by 2050. 

This transition towards green-energy has become a key driver of the need for a local source of lithium, especially as the EU currently has no local supply and requires imports from China and South America. As a result we expect domestic suppliers of the raw-materials that are critical for battery production to thrive. 

Why do we continue to hold EMH in 2022?

  1. Strategically important location – EMH’s Lithium project is ideally located in the heart of Europe in Czech Republic – very close proximity to Major Automakers who are all switching to Electric vehicle production. 
  2. Advanced development ready project – EMH’s project is arguably the most advanced near term lithium producer in the EU. The project is currently having a PFS (Pre-Feasibility-Study) updated & has already commenced works on a DFS (Definitive Feasibility Study).

  3. EMH is yet to sign an offtake partner – With the lithium market currently a sellers market, projects that have lithium in the ground and close to being development ready are attractive offtake options for buyers looking to secure lithium supply. EMH is yet to sign an offtake partnership which we think is a key catalyst for this year. 

What do we expect EMH to deliver in 2022?

Objective #1: DFS (Definitive Feasibility study)

We are hoping the FEED (Front-End Engineering Design) is completed and it forms the basis for a completed DFS which we hope to see before the end of 2022.

Objective #2: Progress on development financing

We also want to see EMH make meaningful progress on a funding plan for the construction of the project. This funding could be delivered in various forms – debt, grants, or even direct investment by new partners. By the end of 2022, we expect the financing strategy to be a lot clearer.

Objective #3: Offtake agreement 

After the DFS is completed and a final-investment decision has been made we expect to see some progress made with respect to the signing of offtake agreements. 

What could go wrong?

Regulatory risk: EMH’s lithium project is a fairly advanced stage project which means it is in the final stages of permitting before it is ready for a final investment decision. There is a risk that the project gets held up in the permitting process and the regulators reject  the company’s mining license applications. 

Financing risk: EMH’s asset is fairly advanced & is approaching a stage where a final investment decision needs to be made, deteriorating market conditions may deter financiers from making a large capital investment which will mean the project is unable to be put into production. 

Commodity risk: EMH is a mining company, generally these businesses are price-takers for their product & lithium is no different. In the event that supply outstrips demand EMH’s project may be considered uneconomic (Stranded). 

What is our investment plan?

Our plan is to hold a position in EMH over a 5 to 7 year period, through the construction of the project.

We have held for almost one year and have taken a small amount of profit having sold down 13% of our total holding (as per our standard investment strategy). We may look to sell a further 7% during 2022, hopefully into a share price rerate on the back of the company delivering on the three key objectives for 2022 listed in this memo. 

Disclosure: The authors of this memo and owners of Wise-Owl, S3 Consortium Pty Ltd, and associated entities, own 261,000 EMH shares at the time of publication. S3 Consortium Pty Ltd has been engaged by EMH to share our commentary on the progress of our investment in EMH over time.

Why We Invested

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Prime Location
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Advanced EU Lithium Producer
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Strong Partnership
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ESG Reporting
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Offtake agreements
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