27. 3. 2020

ČEZ advances to the next stage of preparation for mining lithium at Cínovec

After a thorough assessment of the lithium mining project at Cínovec, ČEZ is advancing to the project’s second stage. The second stage does not involve mining but verifying the production process under pilot plant conditions and pilot test lines. This procedure is standard in any potential ordinary mining activities. Steps to obtain other necessary permits may also be taken. This second testing stage may continue until 2023. ČEZ and Severočeské doly a.s. have therefore agreed to a contractual amendment with EMH and its subsidiary, Geomet, which holds preferential exploration and exploitation rights. The amendment will be subject to approval by the General Meeting of EMH shareholders.

"After careful consideration, due-diligence and preliminary feasibility studies, we are advancing to the next project stage," said Daniel Beneš, Chairman of the Board of Directors and CEO of ČEZ. "The results of our research, which we consulted with Czech and foreign experts, indicate that the project may be profitable. The project is potentially a very interesting opportunity for our company Severočeské doly, which is the largest mining company in the Czech Republic. But first, we have to run pilot operations of the procedures tested in the lab."

No larger facilities will be constructed at Cínovec for this project stage. Rock will be examined in off-site testing facilities, and specific methods of extracting larger volumes of lithium from zinnwaldite will be verified.

Lithium from the Krušné Mountains could subsequently be used in batteries for electric vehicles or electricity storage systems. The European Union has acknowledged the development of battery production in Europe as a strategic priority given the strong presence of the automotive industry and the supply of raw materials such as lithium. With the expected increase in number of electric vehicles and associated need for batteries, the demand for lithium is expected to increase by at least tenfold by 2030. For this stage, we expect to use subsidies available under the strategic initiative European Battery Alliance or the Just Transition Fund.

ČEZ management has now indicated an amendment to the 51 percent acquisition agreement with Geomet, which holds preferential exploration and exploitation rights. Acquisition of a 51% stake will be achieved by raising the company's capital by EUR 29.1 million; the funds will be used to further develop the Cínovec project. The ČEZ Group will have three representatives on the five-member Board of Directors of Geomet, and EMH will have two. Specifically, Severočeské doly, a subsidiary of ČEZ, will acquire a stake in Geomet. The relevant amendment to the contracts between ČEZ, Severočeské doly, Geomet and EMH is still subject to approval by the General Meeting of EMH since this represents a significant change in the company's shareholder structure. The EHM General Meeting should take place in April.

"Examination of the site and the progress of works so far has been very thorough. Czech experts and the most prominent capacities from abroad have participated in this process," said Ivo Pěgřímek, CEO of Severočeské doly. "The Cínovec mining project could provide a long-term work opportunity to a number of our experts. As well as obtaining permits, we need to verify the methods of extracting lithium from the rock and work out a detailed mining project."

The project's second stage will include the final financial and technological feasibility studies. ČEZ and Severočeské doly will only decide whether to proceed with actual mining according to the results of the second stage. If the project eventually proves unprofitable in the coming years, ČEZ and Severočeské doly may decide to abandon it. In this case, the ČEZ Group would automatically recover any unused funds and retain the share of investment expended in developing the project.