European Lithium (ASX:EUR) given $1+ price target by Martin Place

Resources sector analyst Martin Place Securities has put a $1-a-share price target on European Lithium as the company with hopes to become the EU’s first battery-grade producer looks toward a billion-dollar merger and a NASDAQ listing.

Shares in European Lithium are currently trading at 8.6c a share, with the company having a market capitalisation of about $119.9 million.

Martin Place views the strategically located explorer’s portfolio as well undervalued, holding considerable potential to raise its market value and become an early leader in European production – leading to its 24-month price target of about $1 a share and 12-month target of more than 50c a share.

While on the smaller side in scale, European Lithium’s 8.8 kilotonne a year LHM Wolfsberg lithium spodumene mining project in Austria has a critical location.

If the company’s SEC-approved Wolfsberg merger with Sizzle Acquisition Corp is approved by Sizzle investors it would leave European Lithium with $1.1 billion worth of shares in a newly formed company Critical Metals.

Wolfsberg and beyond

The Wolfsberg Lithium Project in Austria is in a unique position within the European Union which is aiming to increase and diversify its raw supplies.

The DFS-validated Wolfsberg project is punching above its weight and holding a net present value of $2.28 billion (at a time of higher prices), and there remains ample space for the ASX-lister to build its resources up into something closer resembling the international behemoths.

The Tony Sage-chaired company has a 20% JV interest in project tenements surrounding Wolfsberg, and several fully owned assets within 80km of the flagship while also holding onto 7.5% of Greenland’s Tanbreez REE deposit and a potential gross value exceeding $4.5 billion.

And then there is Ukraine, a war-stricken nation which may hold Europe’s largest reserves of hard rock lithium where European Lithium has made a play on two potential resources with a view toward peacetime and an internationally funded economic rebuild.

Project location map

Near-term action

But Ukraine is in the long term, and what Martin Place sees as nearer is the potential merger due for completion this month.

The marry-up with a North American company would provide Australian export European Lithium with value well above its current market cap and a significant share in Tanbreez.

Tanbreez is slated by the US Geological Survey as the world’s largest undeveloped REE deposit and on track for a NASDAQ listing next year to support its development.

Lithium markets

European Lithium’s March 2023 definitive feasibility study put a spotlight on Wolfsberg as a low-cost, high-return operation

While the lithium market is currently depressed, the report noted the market was characterised by periods of price volatility and mismatches between demand surges and the timing of large lump-volumes of new supply.

It showed forecasts reflecting an inability of lithium supply to grow rapidly after 2030, even with greater recycling and a large potential supply gap.

And the EU is becoming increasingly stringent on reducing its carbon footprint, introducing new carbon taxes on steel production and regulations and calling for a larger lithium industry to assist a union-wide phase in of electric vehicles by 2035.

BMW has already entered into an offtake agreement with a $22.8 million prepayment for all of the Wolfsberg Zone 1 output for its battery manufacturing operations in Germany, and there remains a collection of new battery plants being planned, which will require local and fully accredited raw materials.

Current and Proposed Lithium Battery Plants in Europe

The merger vote

European Lithium has today entered a trading halt, with its Sizzle acquisition target postponing a vote on the merger until February 6 so parties can finish evaluating investments from the perspective of certain strategic parties connected to the deal.

And, if approved, the newly formed Critical Metals would begin trading on the NASDAQ with the code CRML.

European Lithium will be left holding a large 82 per cent interest of shares in the newco which dwarfs its current market cap.

The company will remain on the Australian bourse as a mining exploration and development company, using its EUR ticker.

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