European Lithium seeks shareholder value boost through $6.9m shares buyback

European Lithium is looking to add value to its remaining shares on issue by buying back up to 100 million shares worth a total of about $6.9m.

The on-market buyback represents about 6.7% of the shares on issue and will be carried out from 17 April 2023 to 31 January 2024.

Shares will only be bought back when the company believes it will be beneficial to its efficient capital management.

European Lithium’s (ASX:EUR) board believes that the company’s shares are currently trading at a significant discount compared to its peers despite catalysts such as a robust Definitive Feasibility Study for its Wolfsberg project, a mining permit already in place, and the imminent completion of the business combination with Sizzle Acquisition Corp.

The divestment of Wolfsberg into the new Critical Metals Corp will leave the company with its newly acquired lithium projects in Austria.

“The board believes the company’s current share price doesn’t reflect the underlying value of the company’s assets,” executive chairman Tony Sage said.

“It’s a fantastic opportunity to buy-back shares at a significant discount and add value to our remaining shares on issue.”

Lithium hydroxide dream

Under the DFS, the Wolfsberg project in Austria is expected to generate 8,800t of lithium hydroxide monohydrate per annum for 14.6 years.

This is expected to generate post-tax net present value and internal rate of return, both measures of a project’s profitability, of US$1.5bn and 33.3% respectively.

It also outlined the tiny environmental footprint of the operation due to use of underground mining and opportunities to take advantage of greener operational alternatives revealed to be economically viable for the project.

An underground portal, concentrator and surface infrastructure will all be located within an envelope of under 10 hectares.

Under its agreement with Sizzle, European Lithium will be issued US$750m worth of shares in Critical Minerals, equivalent to an 80% interest, once Wolfsberg is transferred to the new company.

Critical Minerals will have an implied market capitalisation of US$972m (AUD $1.5b) and pro forma enterprise value of US$838m, both an order of magnitude (10 times) greater than the company’s current market capitalisation of $102.76m.

Meanwhile, its newly acquired projects in the heart of Austria’s Styria mining district grant it control over 114km2 of ground that is highly prospective for spodumene pegmatites though the company flagged that minimal exploration expenditure will be carried out until there is significant de-escalation or resolution of Russia’s invasion of Ukraine.

This article was developed in collaboration with European Lithium, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.