Europe too expensive – Carinthian lithium is processed in Saudi Arabia

Because European Lithium has signed a binding agreement with Saudi Arabian company Obeikan to produce battery-grade lithium, it said Friday. According to CEO Dietrich Wanke, the “exploding energy costs” were the main argument against processing the ore into high-quality lithium in Carinthia.

“Europe not competitive”
The extraction of pure lithium from the ore is energy intensive and requires gas. The recent price explosions would have meant “three quarters of a billion dollars in additional costs”. “You have to say outright that Europe is not competitive for these industries to secure the energy transition.”

According to Friday’s announcement, European Lithium expects significant savings in ongoing operating costs, including energy costs, capital costs and significantly lower taxes as a result of the agreement. The entire cost accounting for the project is now updated. According to Wanke, European Lithium in particular saves around 350 million euros that were planned for the construction of the lithium factory in Wolfsberg. Under the agreement, all lithium-bearing ore from Wolfsberg will go to Saudi Arabia.

About 400 jobs will be lost in the region
The plan was to build a hydrometallurgical plant south of the district town of Wolfsberg where 70,000 tons of concentrated ore, called spodumene, would be processed into nearly 9,000 tons of lithium suitable for batteries. According to the 2018 announcement, about 130 three-shift jobs should have been created there, so about 400 jobs in total.

Instead, the spodumene for this work step is now being shipped to Saudi Arabia in containers. The cost is “marginal” because the ore only needs to be trucked to the Koralm tunnel in 20 minutes and then transported by train and ship, Wanke says. He emphasizes that neither the environmental impact assessment (EIA) required for the Wolfsberg plant nor tax benefits in Saudi Arabia were decisive for the reorientation. But the US partners said, “Stay away from energy-intensive industries in Europe.”

Market cap of nearly $1 billion
The mining rights to the lithium deposits on the Koralm are owned by the company “European Lithium AT Limited”, based in the Virgin Islands, a subsidiary of the Australian company European Lithium. This subsidiary will now be transferred to a company listed on the US NASDAQ stock exchange, creating a new company called “Critical Metals”. Its market capitalization is estimated at nearly a billion dollars at launch.

European lithium is currently worth around 82 million euros on the Australian stock exchange – a good tenth of the American stock market newcomer. This is not surprising for Wanke. European lithium is “massively undervalued” as an exploration company. The documents, scrutinized by the US Securities and Exchange Commission, would show an expected profit of $ 1.5 billion. Given the expansion of electromobility, Wanke assumes that there will be an increasing demand for lithium with a shortage of supply and that prices will therefore continue to rise.

Agreement with BMW
While Wanke isn’t concerned about the demand, BMW has already contracted to purchase lithium suitable for batteries. Accordingly, BMW will pay $15 million upfront and receive the battery-capable lithium initially for five years at a 10 percent discount from the current market price.

From the current perspective, ore mining on the Koralm should begin in 2025 and the first battery-compatible lithium should hit the market in late 2026 or early 2027, Wanke said. However, the company still has a tough road ahead.

Various delays
While there is no EIA because the European Lithium needs less than 10 hectares of base use above ground, other environmental assessments and the specific financing plan are still open. It is also possible that local residents object, which can lead to years of delay. That would not be a new situation for lithium mining on the Koralpe: when the project went to Australians in 2011, ore mining should start in 2013.