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Zinnwald And European Are Mining The Same Deposit – So The Shares Move Together

Tim Worstall
Tim Worstall trader
Updated 27 Jul 2022

Trade Zinnwald Lithium Shares Your Capital Is At Risk

Key points:

  • Zinnwald and European are not looking to mine the exact same deposit
  • But it's close enough that it's a useful analysis method at times
  • Which could be why both share prices are weakening

Zinnwald Lithium (LON: ZINN) and European Metals (LON: EMH) are, to a close enough level of accuracy, mining the same deposit. This is one of those things which isn't in fact, wholly and exactly, true but it is also one of those things which can produce a useful starting point for consideration of the two companies. For they are indeed mining – or hoping to mine – what is very close to being the same deposit. Zinnwald is a little German village, the European Metals deposit is underneath Cinovec in Czechia, but the boundaries between Zinnwald and Cinovec as villages are in fact the border itself. You can, and I have done, stand with a foot in each at the same time.

Now the deposits are in fact delineated, they're not exactly the same volumes of minerals, one is very much further down the hill than the other. Cinovec is also much heavier in tin. On the other hand the lithium content of both is embedded in the same material, the zinnwaldite (a form of lithium containing mica). So we can usefully consider at least certain aspects of the two companies in the same way. For example, how to efficiently extract the lithium from the zinnwaldite matters to both Zinnwald and European.

At which point, perhaps we shouldn't be all that hugely surprised when the share prices rather move in tandem.

European Metals share price
European Metals share price from IG

Also Read: The Best Lithium And Lithium Mining Stocks To Buy

Both share prices are down around 1.5% this morning for example. This despite Zinnwald announcing that it has started drilling. So, that the two companies, Zinnwald and Lithium, are looking at much the same minerals, in much the same deposit, could well lead us to think that their share prices should roughly track each other. On the other hand, they're also at slightly different levels of development, so perhaps they shouldn't?

But what really happens here is that the differences are specific so specific differences and changes should change their relative prices. For example, Zinnwald bringing in Gangfeng as an investor. But the claim by Zinnwald that their lithium extraction method from zinnwaldite works should also influence European Metals.

Rather more important though both of them are going to be influenced in the same way by thoughts about the markets for their production in the future. European emphasises its tin production a little more, Zinnwald the lithium but as we say there's more than a little of both in their respective deposits. So, beliefs about the future prices of tin and lithium are going to affect the share prices of Zinnwald and European in largely similar ways.

Which is perhaps where the problem is. For the long term forecasts for both metals are gradually falling. Not because the renewables revolution isn't happening, but because there are many, many, miners looking to ramp up the production of both metals. That is, of course, a downer for any individual would be producer – the price of their future production looks rather lower now than it did even 6 months back.

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