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European Metals, EMH, Up 10% On No News – Why?

Tim Worstall
Tim Worstall trader
Updated 1 Apr 2022

Buy EMH Shares Your Capital Is At Risk

Key points:

European Metals (LON: EMH) shares are up near 10% in London this morning, with no particular piece of news to explain this. The answer must be, therefore, that sentiment about the company is changing so it might be worth examining why this might be so.

European Metals is, as we’ve outlined before, a would-be tin and lithium miner looking to exploit the Cinovec deposit on the Czech German border. The tin deposit is definitely there, and so too is the presence of the lithium well known. It’s an old mining area, there’s local support (and, obviously, environmental opposition as well) to the plan.

However, there are certain details that must also be dealt with. One is that the lithium is contained within a form of mica called zinnwaldite. Whether this can be processed economically – it can certainly be done, but at a profit? – has until recently been unknown. The claim is, from Zinnwald Lithium, that it can be. It might be a little odd to use evidence from a different company, in a different country, but this does make sense here. Zinnwald is, at its closest, perhaps 5 metres from Cinovec. They’re almost – almost but not quite – the same village but on different sides of the border. The mineral deposits underneath are also not quite exactly the same one but they’re very closely related. So, if Zinnwald says it can get the lithium out of the mica then that’s good news for European Metal.

Also Read: Base & Precious Metal Trading Guide

It’s also true that the tin price has recently been on a tear. As at Cornish Metals, this matters. For while European Metals definitely has tin and lithium down there, it’s also true that this is a hard rock deposit. Hard rock deposits for both metals are more expensive to extract from than the brines for lithium and the alluvial deposits for tin. This is just how it works, digging deep to gain rock that must be crushed just is more expensive than collecting what erosion has already processed for you.

So, hard rock deposits are always the marginal ones. They’re worth mining only when prices are high. When prices are low it is the low-cost producers who survive and the marginal ones either shutter or lose money for that period.

This means that high prices for some time are desired before folk will invest in those new hard rock projects. Which is roughly where European Metals is at present, constructing the financing package to make the actual mine a reality. High tin prices make that an easier sell, of course.

We have no specific news to explain this increase in the European Metals share price. As such we must assume that it is the accretion of other and smaller pieces of evidence that is doing it. The big trading decision is, of course, whether this will continue and that depends upon your view of these technical details.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.