There’s big potential in European Lithium’s new Ukrainian ground

European Lithium has reached an agreement to acquire Petro Consulting, which is applying for special extraction and processing permits over two projects in Ukraine.

While both the Shevchenkivske and Dobra lithium projects have foreign resource estimates based on significant previous drilling, the company does not have access to much of this data, leading it to report the estimate as conceptual exploration targets.

European Lithium (ASX:EUR) plans to test these targets by carrying out a program of twinned holes over the project areas for comparison against historical data and collection of core for structural, geotechnical and metallurgical analysis.

Should the original data be deemed acceptable, it will be used with the new data to create modern JORC resources for both projects.

This is potentially very significant for the company as Shevchenkivske has an Exploration Target of between 11 million tonnes and 14Mt grading between 1.2% and 1.3% lithium oxide while Dobra has a significantly larger Exploration Target of between 80Mt and 105Mt grading 1.1% to 1.4% Li2O.

By way of comparison, the company’s flagship Wolfsberg project in Austria hosts a current resource of 10.98Mt at 1% Li2O including a higher confidence measured and indicated resource of 6.3Mt at 1.17% Li2O.

It also underscores the company’s low valuation compared to its peers.

European Lithium currently has a market cap of $143.26m compared to companies such as Core Lithium (ASX:CXO) with a market cap of $953m and a resource of 14.7Mt grading 1.3% Li2O while Liontown Resources (ASX:LTR) weighs in at a chonky $3.7bn and a resource of 156Mt at 1.4% Li2O for its Kathleen Valley project.

“I’m very excited about the opportunity to potentially purchase these Ukrainian lithium assets to add to our advanced Wolfsberg Lithium Project,” non-executive chairman Tony Sage said.

“If the acquisition completes, we aim to become the first and largest local producer of lithium hydroxide in Europe.”

The company remains focused on delivering a definitive feasibility study for the Wolfsberg project by the end of the first quarter 2022 to capitalise on the growing demand for lithium.

Acquisition

European Lithium is acquiring Petro Consulting from vendor Millstone for $20m in EUR shares. Of the $20m placement, $2.5m is to be issued at $0.095 per share immediately, with another $2.5m at $0.095/share subject to shareholder approval. Another $5m will be issued post-completion at $0.095/share, and the remaining $10m will be issued within 30 days of the deal’s completion, to be issued at the greater of 80% of the five-day VWAP, or $0.095/share.

It will also issue 50m performance shares with a surface value of $1 that convert to ordinary shares at an issue price of the greater of 80% of the 20-day volume weighted average price immediately prior to the conversion event and $0.095.

This is conditional on Petro Consulting being issued the relevant special permits for the extraction and production of lithium and approval by EUR shareholders.

As part of the acquisition, Millstone has agreed to invest up to $20m in the company. This consists of an immediate $2.5m investment, another $2.5m subject to EUR shareholder approval and the remaining $15m in two tranches on completion of the acquisition of Petro Consulting.

Millstone representative Mykhailo Zhernov will be appointed to the company’s board upon completion of the first tranche of the placement.

Proceeds from the first two tranches will be used to progress the Wolfsberg DFS while the remaining funds will be used for exploration on the Ukrainian projects.

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.