First Berlin Equity Research has published a research update on European Lithium Limited (ISIN: AU000000EUR7). Analyst Simon Scholes reiterated his BUY rating and decreased the price target from EUR 0.17 to EUR 0.14.
Abstract
Early this year European Lithium (EUR) formed the NASDAQ-listed Critical Metals Corp (CRML) – EUR’s stake 73% – into which it inserted its Austrian Wolfsberg Lithium Project (WLP). CRML was formed to access financing from the U.S. capital market for both the WLP and other lithium and critical minerals projects. EUR/CRML have made great strides in advancing both the WLP and financing other projects in 2024. In June EUR/CRML received USD15m from BMW in connection with the agreed lithium hydroxide offtake from the WLP, and in July entered into a shareholder agreement with Obeikan to build and operate a lithium hydroxide plant in Saudi Arabia. Recent notice from the Carinthian state government in Austria that an Environmental Impact Assessment is not required, paves the way for fast track approval of the WLP. Meanwhile CRML has used its own shares to acquire 42% in the Tanbreez Project in Greenland (EUR has 7.5%) and has started drilling with a view to raising its stake above 90%. Tanbreez is fully permitted and hosts the world’s largest rare earth resource (JORC 2012-compliant) which includes 60% of the world’s non-Chinese heavy rare earths as well as large resources of niobium, tantalum and zirconium. Lastly, EUR used CRML shares to acquire a lithium project in Ireland adjacent to a similar project currently being explored by Ganfeng, the largest Chinese lithium producer. The current spodumene price (87% below its 2022 high) has prompted Australian producers, who account for ca. 50% of worldwide lithium output, to cut originally planned 2025 production by 15%. Current pricing is too low to incentivize new supply in Australia and is impacting longer term supply. Against this backdrop, the consultancy Benchmark Mineral Intelligence recently brought forward its forecast timing for the emergence of a lithium supply deficit from 2029 to late 2027. This coincides with the expected start of production at the WLP. We expect CRML/EUR to use CRML shares to finance the WLP. The decline in the CRML share price prompts us to model greater dilution of EUR’s CRML stake than in our most recent March update. We have lowered our price target from €0.17 to €0.14 but maintain our Buy recommendation.
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