For immediate release                                                                                                       31 July 2024

QUARTERLY ACTIVITIES REPORT

30 JUNE 2024

European Metals Holdings Limited (ASX & AIM: EMH, OTCQX: EMHXY and EMHLF) ("European Metals" or the "Company") is pleased to provide an update on its activities during the three-month period ending 30 June 2024 highlighting the continued progress in the development of the globally significant Cinovec Lithium Project ("the Project" or "Cinovec") in the Czech Republic during the quarter.

Cinovec Lithium Project and DFS Update

On 27th March 2024, the Company shared an update regarding the Cinovec Project's Definitive Feasibility Study ("DFS"). Recent testwork, engineering and environmental work as part of the DFS process has identified key areas for potential improvements to the Project's lithium processing flowsheet. Geomet's management team, working with DRA Global, is currently further reviewing these developments. This review is crucial to the enhancement of economic and social outcomes for the project.

The Company also confirmed that existing physical and hydrometallurgical process flowsheet designs have been deemed suitable for engineering and construction purposes. They are expected to deliver high levels of lithium recovery from raw ore through to battery-grade final products.

Subsequent to the end of quarter, the Company announced that the timeline for the completion of the Definitive Feasibility Study ("DFS") and therefore construction of the Cinovec lithium processing plant continues to be worked on.

Given the change to the location of the lithium processing plant from Dukla to Prunéřov, additional geotechnical work is currently underway to confirm the optimal construction method and layout at the new site. Results from this geotechnical work are expected to be available at the end of September. DRA Global is then expected to provide a detailed timeline and begin the DFS finalisation program of work.

The Company will provide a further update to the market once it has received a revised timeline for completion of the DFS.

The Project team continues to progress several DFS-related programs on the Front-End Comminution and Beneficiation circuit ("FECAB") and Lithium Chemical Plant circuit ("LCP") to improve the overall flowsheet which are expected to positively impact Project economics.

Process Flowsheet Improvements - FECAB

The Company previously announced changes to the FECAB process flowsheet from beneficiation based entirely on magnetic separation to a process incorporating both magnetic separation and flotation, (see the Company's ASX/ AIM announcement of 31 October 2022 "Simplified Extraction Process Delivers Exceptionally Clean Battery-Grade Lithium Product with Improved Economics"). This improvement yielded a total FECAB lithium recovery of >87%, with 7-8% lost to the fines fraction and the balance of 5-6% losses due to process inefficiency. By mass, the proportion of the ore recovered to concentrate achieved was 30% of the total feed and the grade of the concentrate entering the LCP was 1.198% lithium (2.58% Li₂O).

To improve FECAB performance, targeting a higher-grade concentrate, additional flotation testwork has been carried out. Representative ore samples were utilised, milled to P80<150μm and tested without removing the <20μm slimes fraction before flotation.

Results, benefits and impacts of this testwork are:

·      Potential for complete elimination of the magnetic separation step from the FECAB flowsheet;

·      Flotation process without desliming has been successfully optimised, which improves the recovery of zinnwaldite from the <20μm fraction whilst not impacting reagent consumption or other process beneficiation performance factors;

·      A capability to deliver overall FECAB lithium recovery improvements from >87% to >94.7%, proven on a repeated basis;

·      Uplift in concentrate grade from 1.198% Li (2.58% Li₂O) to produce almost pure zinnwaldite concentrate with average grade of 1.46% Li (3.14% Li₂O);

·      The grades of concentrate produced in the flotation testwork are the highest to date, based on the recoveries achieved and mass rejection (of gangue) of 80% on average;

·      The flotation testwork program was carried out at neutral pH and there was no need for chemical addition to adjust pH;

·      The above results are from repeated locked cycle testwork;

·      The locked cycle testwork achieved optimisation of recirculation in the flotation circuit, such that the final circuit contained only a single recirculation stream;

·      The improved lithium grade and purity of concentrate recovered are expected to significantly impact both the operating costs per tonne ("Opex/t") of battery-grade end-product as well as the capital expenditure per tonne ("Capex/t") for the LCP;

·      The results of this recent testwork have translated into impacts on the DFS which include re-sizing of kilns for roasting the concentrate and reagent and energy consumption reductions for the same overall process outputs, with the intensive magnetic separation plant Capex/t and Opex/t eliminated;

·      Expected economic improvements include a reduction in roasting reagents (gypsum, limestone and sodium sulphate) required for the same output;

·      The purity of the flotation concentrate achieved further supports production of exceptionally clean battery-grade end products for Cinovec;

·      A flotation-only process simplifies the FECAB operationally (in addition to reducing Capex/t and Opex/t);

·      The measured Particle Size Distribution ("PSD") of the flotation concentrate is close to the ideal PSD for kiln feed.  As a result, the need for a concentrate regrind mill currently in the process flowsheet is being re-assessed.

The flotation testwork has yielded excellent results and the Project team is now considering the full ramifications in bulk materials handling, tailings storage and backfilling, should a positive decision be made to change the FECAB process flowsheet to 100% flotation beneficiation. The Company will provide an update when a decision has been made.

Process Flowsheet Improvements - Lithium Chemical Plant

The principal roasting reagents mixed with lithium-bearing ore (zinnwaldite) concentrate, as stated above, are gypsum, limestone and sodium sulphate. The LCP process produces a waste stream of mixed sulphate, including sodium sulphate, potassium sulphate, rubidium sulphate, with a residual component of lithium sulphate derived from lithium which is not converted into lithium phosphate during its first pass through the lithium phosphate reactor tank.

The Company has recently managed locked cycle tests that demonstrate the effects of replacing sodium sulphate roasting reagent entirely with the mixed sulphate waste stream, targeting reduced overall reagent consumption.

Nine locked cycles were performed with fully-representative zinnwaldite concentrate roasted in each test. This testwork was undertaken at Nagrom Laboratories in Perth, WA.

These tests have been successful, with the overall lithium recovery in the LCP circuit remaining in the previously announced range of 88-93% (see the Company's ASX/ AIM announcement of 31 October 2022 "Simplified Extraction Process Delivers Exceptionally Clean Battery-Grade Lithium Product with Improved Economics").

The recycling of this mixed sulphate waste stream is a key component of the patent pending for the Cinovec LCP process.

The benefits and impacts of this optimisation testwork of the LCP circuit are:

·      Elimination of sodium sulphate as a roasting reagent, reducing Opex/t for the project;

·      Lithium not recovered in its first pass through the lithium phosphate reactor tank circuit is reprocessed, enabling higher overall lithium recovery. Modelling, based on the results of cycles 5 and 6 of the 2022 Locked Cycle Test program (see the Company's ASX/ AIM announcement of 31 October 2022 "Simplified Extraction Process Delivers Exceptionally Clean Battery-Grade Lithium Product with Improved Economics") assuming fresh, pure (>98%) sodium sulphate addition upfront, estimates the amount of lithium lost to the mixed sulphate waste stream as 1.2%. This is now available for recovery in the revised LCP circuit design; and

·      Reduction in the overall mixed sulphate waste stream required to be onwards-treated has been achieved, further reducing Opex/t of the end-product.

The updated LCP circuit design with recycling of mixed sulphate into the roast mix results in recycling of approximately 50% of the total mixed sulphate produced. The remaining mixed sulphate will be reprocessed as waste.

Just Transition Fund

Representatives of Geomet met with the Regional Standing Conference ("RSK") in the Czech Republic which is one of the bodies that approves and recommends Just Transition Fund ("JTF") support.

Geomet has submitted an initial application for funding of a part of the project (called a "sub-project"), which initially included the preliminary mine portal area works - a box-cut (mine entrance), an exploration adit, work on a portal access road. These construction works are able to take place under the existing exploration licenses and not requiring an Environmental Impact Assessment ("EIA").  The total initial grant requested from the JTF has in turn been reduced from CZK 1.12 billion to CZK 0.8 billion (approximately EUR 31 million).

The RSK meeting has recommended the sub-project for JTF support. The next step will be the final funding approval by the Ministry of Environment.

The Cinovec Project remains crucial for EU's critical materials security, and the formal adoption by the EU of CRMA will streamline permitting processes for such projects (refer to the Company's ASX/AIM releases dated 27 March 2024 and 31 July 2024 "Cinovec Project Update").

Successful Production of Lithium Hydroxide

On 11 April 2024, the Company announced that the pilot program had confirmed the feasibility of the Lithium Chemical Plant ("LCP") process for large-scale production of lithium carbonate and lithium hydroxide, converting crude lithium carbonate into exceptionally clean battery-grade lithium hydroxide monohydrate (refer to the Company's ASX/AIM release dated 11 April 2024) "Successful Production of Lithium Hydroxide").

Appointment of New Director

On 18 April 2024, the Company appointed Merrill Gray as a Non-Executive Director. Merrill brings over 30 years of metallurgical and mining engineering as well as geology experience to the Board, along with large-scale new technology project development and production management skills.  (refer to the Company's ASX/AIM release dated 18 April 2024 "Appointment of Director").

New Plant Site to Improve Project Permitting and Economics

On 26 April 2024, the Company announced the selection of a new site for the Cinovec Lithium Processing Plant at the Prunéřov industrial site. Located approximately 59 km from Dukla and the mine. This move, following preliminary agreement and support from municipal and regional governments, is expected to enhance permitting and project economics. The larger site allows for a more cost-effective plant layout and faster construction, with ore to be transported from Cinovec to Prunéřov via existing rail facilities (refer to the Company's ASX/AIM release dated 26 April 2024 "New Plant site to improve Project Permitting and Economics").

Redomiciliation

The redomiciliation of the Company from the British Virgin Islands to Australia was completed on 7 May 2024 following lodgement of a notice of intention to discontinue out with the British Virgin Islands registry ("BVI Registry").

Upon filing the Discontinuance Documents, the BVI Registrar of Corporate Affairs issued a certificate of discontinuance. The certificate of discontinuance provided prima facie evidence that all the requirements of the BVI Business Companies Act in respect of the continuation of a company under the laws of a foreign jurisdiction have been complied with, and that the Company was discontinued on the date specified in the certificate of discontinuance.

European Metals is now domiciled in Australia as a company governed under the Corporations Act 2001 (Cth) ("Australian Continuance"). The new Constitution replaced the existing Articles of Association of the Company and the Company's registered office is now Level 3, 88 William Street, Perth WA 6000. The Board believes that the Australian Continuance should lead to substantial cost savings and improvements in the Company's administration and efficiency of operations. Additionally, it will remove a potential impediment to obtaining European development financial assistance for the Cinovec project. 

Application was made to the London Stock Exchange for the readmission of 207,444,705 ordinary shares of no-par value ("Shares"), held as Shares in Australia and via Depository Interests ("DIs") in the UK.  The readmission became effective and dealings in the Shares recommenced on AIM on 10 May 2024.  On readmission, the Company confirms its ISIN as AU000000EMH5 and SEDOL as BSC9SJ5.

All securityholders who previously held their securities in the form of CHESS Depositary Interests ("CDIs") on ASX became shareholders directly in the Company rather than through the CDI nominee and those Shares are tradeable on ASX. The existing CDIs were converted on a 1:1 basis into Shares and new holding statements were issued to the shareholders.

CORPORATE AND ADMINISTRATION

QUARTERLY CASHFLOW REPORT

In accordance with the ASX Listing Rules, the Company will also today lodge its cashflow report for the quarter ended 30 June 2024.  There was no cash outflow for Cinovec associated costs in respect of the Company's investment in the Cinovec Lithium Project in the Czech Republic during the quarter.

The Company's total cash is $4.7 million as at 30 June 2024.  It is noted that there is approximately a further $565k in receivables from the Company's associate, Geomet s.r.o, in relation to the provision of services managing the Cinovec Project development, as at 30 June 2024. 

PAYMENTS TO RELATED PARTIES

As outlined in the attached Appendix 5B (section 6.1), during the quarter approximately $211,000 in payments were made to related parties and their associates for director salaries, consultancy fees, superannuation, and other related costs.  A portion of these expenses is to be reimbursed directly from Geomet.

CORPORATE ACTIVITY

Following its registration as an Australian company, the Company adopted a new Constitution which was previously approved by shareholders at the Annual General Meeting held on 22 December 2023.

GEOMET TENEMENT SCHEDULE

Table 1: Geomet Tenements

This announcement has been approved for release by the Board.

CONTACT

For further information on this update or the Company generally, please visit our website at www.europeanmet.com or see full contact details at the end of this release.

BACKGROUND INFORMATION ON CINOVEC

PROJECT OVERVIEW

Cinovec Lithium Project

Geomet s.r.o. controls the mineral exploration licenses awarded by the Czech State over the Cinovec Lithium Project. Geomet has been granted a preliminary mining permit by the Ministry of Environment and the Ministry of Industry. The company is owned 49% by EMH and 51% by CEZ a.s. through its wholly owned subsidiary, SDAS. Cinovec hosts a globally significant hard rock lithium deposit with a total Measured Mineral Resource of 53.3Mt at 0.48% Li₂O, Indicated Mineral Resource of 360.2Mt at 0.44% Li₂O and an Inferred Mineral Resource of 294.7Mt at 0.39% Li₂O containing a combined 7.39 million tonnes Lithium Carbonate Equivalent (refer to the Company's ASX/AIM release dated 13 October 2021) (Resource Upgrade at Cinovec Lithium Project).

An initial Probable Ore Reserve of 34.5Mt at 0.65% Li₂O reported 4 July 2017 (Cinovec Maiden Ore Reserve - Further Information) has been declared to cover the first 20 years mining at an output of 22,500tpa of lithium carbonate (refer to the Company's ASX/AIM release dated 11 July 2018) (Cinovec Production Modelled to Increase to 22,500tpa of Lithium Carbonate).

This makes Cinovec the largest hard rock lithium deposit in Europe and the fifth largest non-brine deposit in the world.

The deposit has previously had over 400,000 tonnes of ore mined as a trial sub-level open stope underground mining operation.

On 19 January 2022, EMH provided an update to the 2019 PFS Update. It confirmed the deposit is amenable to bulk underground mining (refer to the Company's ASX/AIM release dated 19 January 2022) (PFS Update delivers outstanding results). Metallurgical test-work has produced both battery-grade lithium hydroxide and battery-grade lithium carbonate at excellent recoveries. In February 2023 DRA Global Limited ("DRA") was appointed to complete the Definitive Feasibility Study ("DFS").

Cinovec is centrally located for European end-users and is well serviced by infrastructure, with a sealed road adjacent to the deposit, rail lines located 5 km north and 8 km south of the deposit, and an active 22 kV transmission line running to the historic mine. The deposit lies in an active mining region.

The economic viability of Cinovec has been enhanced by the recent push for supply security of critical raw materials for battery production, including the strong increase in demand for lithium globally, and derived from within Europe specifically, as demonstrated by the European Union's Critical Raw Materials Act (CRMA).

BACKGROUND INFORMATION ON CEZ

Headquartered in the Czech Republic, CEZ a.s. is one of the largest companies in the Czech Republic and a leading energy group operating in Western and Central Europe. CEZ's core business is the generation, distribution, trade in, and sales of electricity and heat, trade in and sales of natural gas, and coal extraction. The foundation of power generation at CEZ Group are emission-free sources. The CEZ strategy named Clean Energy for Tomorrow is based on ambitious decarbonisation, development of renewable sources and nuclear energy. CEZ announced that it would move forward its climate neutrality commitment by ten years to 2040.

The largest shareholder of its parent company, CEZ a.s., is the Czech Republic with a stake of approximately 70%. The shares of CEZ a.s. are traded on the Prague and Warsaw stock exchanges and included in the PX and WIG-CEE exchange indices. CEZ's market capitalisation is approximately EUR 20.3 billion.

As one of the leading Central European power companies, CEZ intends to develop several projects in areas of energy storage and battery manufacturing in the Czech Republic and in Central Europe.

CEZ is also a market leader for E-mobility in the region and has installed and operates a network of EV charging stations throughout Czech Republic. The automotive industry in the Czech Republic is a significant contributor to GDP, and the number of EV's in the country is expected to grow significantly in the coming years.

COMPETENT PERSONS

Information in this release that relates to the FECAB metallurgical testwork is based on, and fairly reflects, technical data and supporting documentation compiled or supervised by Mr Walter Mädel, a full-time employee of Geomet s.r.o an associate of the Company. Mr Mädel is a member of the Australasian Institute of Mining and Metallurgy (AUSIMM) and a mineral processing professional with over 27 years of experience in metallurgical process and project development, process design, project implementation and operations. Of his experience, at least 5 years have been specifically focused on hard rock pegmatite Lithium processing development. Mr Mädel consents to the inclusion in the announcement of the matters based on this information in the form and context in which it appears.  Mr Mädel is a participant in the long-term incentive plan of the Company.

Information in this release that relates to exploration results is based on, and fairly reflects, information and supporting documentation compiled by Dr Vojtech Sesulka. Dr Sesulka is a Certified Professional Geologist (certified by the European Federation of Geologists), a member of the Czech Association of Economic Geologist, and a Competent Person as defined in the JORC Code 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Dr Sesulka has provided his prior written consent to the inclusion in this report of the matters based on his information in the form and context in which it appears. Dr Sesulka is an independent consultant with more than 10 years working for the EMH or Geomet companies. Dr Sesulka does not own any shares in the Company and is not a participant in any short- or long-term incentive plans of the Company.

Information in this release that relates to metallurgical test work and the process design criteria and flow sheets in relation to the LCP is based on, and fairly reflects, information and supporting documentation compiled by Mr Grant Harman (B.Sc Chem Eng, B.Com). Mr Harman is an independent consultant and the principal of Lithium Consultants Australasia Pty Ltd with in excess of 14 years of lithium chemicals experience. Mr Harman has provided his prior written consent to the inclusion in this report of the matters based on his information in the form and context that the information appears. Mr Harman is a participant in the long-term incentive plan of the Company.

The information in this release that relates to Mineral Resources and Exploration Targets is based on, and fairly reflects, information and supporting documentation prepared by Mr Lynn Widenbar. Mr Widenbar, who is a Member of the Australasian Institute of Mining and Metallurgy and a Member of the Australasian Institute of Geoscientists, is a full-time employee of Widenbar and Associates and produced the estimate based on data and geological information supplied by European Metals. Mr Widenbar has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the JORC Code 2012 Edition of the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves. Mr Widenbar has provided his prior written consent to the inclusion in this report of the matters based on his information in the form and context that the information appears. Mr Widenbar does not own any shares in the Company and is not a participant in any short- or long-term incentive plans of the Company.

The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral Resources or Ore Reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Person's findings are presented have not been materially modified from the original market announcement.

CAUTION REGARDING FORWARD LOOKING STATEMENTS

Information included in this release constitutes forward-looking statements. Often, but not always, forward looking statements can generally be identified by the use of forward looking words such as "may", "will", "expect", "intend", "plan", "estimate", "anticipate", "continue", and "guidance", or other similar words and may include, without limitation, statements regarding plans, strategies and objectives of management, anticipated production or construction commencement dates and expected costs or production outputs.

Forward looking statements inherently involve known and unknown risks, uncertainties and other factors that may cause the company's actual results, performance, and achievements to differ materially from any future results, performance, or achievements. Relevant factors may include, but are not limited to, changes in commodity prices, foreign exchange fluctuations and general economic conditions, increased costs and demand for production inputs, the speculative nature of exploration and project development, including the risks of obtaining necessary licences and permits and diminishing quantities or grades of reserves, political and social risks, changes to the regulatory framework within which the company operates or may in the future operate, environmental conditions including extreme weather conditions, recruitment and retention of personnel, industrial relations issues and litigation.

Forward looking statements are based on the company and its management's good faith assumptions relating to the financial, market, regulatory and other relevant environments that will exist and affect the company's business and operations in the future. The company does not give any assurance that the assumptions on which forward looking statements are based will prove to be correct, or that the company's business or operations will not be affected in any material manner by these or other factors not foreseen or foreseeable by the company or management or beyond the company's control.

Although the company attempts and has attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in forward looking statements, there may be other factors that could cause actual results, performance, achievements or events not to be as anticipated, estimated or intended, and many events are beyond the reasonable control of the company. Accordingly, readers are cautioned not to place undue reliance on forward looking statements. Forward looking statements in these materials speak only at the date of issue. Subject to any continuing obligations under applicable law or any relevant stock exchange listing rules, in providing this information the company does not undertake any obligation to publicly update or revise any of the forward looking statements or to advise of any change in events, conditions or circumstances on which any such statement is based.

LITHIUM CLASSIFICATION AND CONVERSION FACTORS

Lithium grades are normally presented in percentages or parts per million (ppm). Grades of deposits are also expressed as lithium compounds in percentages, for example as a percent lithium oxide (Li₂O) content or percent lithium carbonate (Li₂CO₃) content.

Lithium carbonate equivalent ("LCE") is the industry standard terminology for, and is equivalent to, Li₂CO₃. Use of LCE is to provide data comparable with industry reports and is the total equivalent amount of lithium carbonate, assuming the lithium content in the deposit is converted to lithium carbonate, using the conversion rates in the table included below to get an equivalent Li₂CO₃ value in percent. Use of LCE assumes 100% recovery and no process losses in the extraction of Li₂CO₃ from the deposit.

Lithium resources and reserves are usually presented in tonnes of LCE or Li.

The standard conversion factors are set out in the table below:

Conversion Factors for Lithium Compounds and Minerals

WEBSITE

A copy of this announcement is available from the Company's website at www.europeanmet.com/announcements/.

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014 ("MAR") as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

Appendix 5B

Mining exploration entity or oil and gas exploration entity
quarterly cash flow report

Compliance statement

1        This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2        This statement gives a true and fair view of the matters disclosed.

Date:                31 July 2024

Authorised by:  The Board

(Name of body or officer authorising release - see note 4)

Notes

1.          This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity's activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2.          If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3.          Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4.          If this report has been authorised for release to the market by your board of directors, you can insert here: "By the board". If it has been authorised for release to the market by a committee of your board of directors, you can insert here: "By the [name of board committee - eg Audit and Risk Committee]". If it has been authorised for release to the market by a disclosure committee, you can insert here: "By the Disclosure Committee".

5.          If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.