EDITOR: | May 26th, 2015 | 1 Comment

Cobre Montana’s lithium and technology metals on Germany’s border and radar

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It would be fair to say that my writing up developments at Cobre Montana’s (ASX:CXB) lithium deposit in the Czech Republic is almost the inevitable result of a string of research pieces on recent times on tin, lithium German resource strategies and revival of interest in mining at the Frankfurt Stock Exchange. Cobre Montana manages to tie all these threads into something of a tidy bow.

In the annals of bizarrely named companies, Cobre Montana, really takes the prize. By the name one might think it is a copper miner run by Latinos operating in Montana. Instead it is a lithium explorer operating in the Czech Republic. Go figure..

In any case the project is finally starting to gain traction and it is ticking the right boxes for those who wish to see a revival in mining activity in the EU with the end goal being enhanced resource security particularly in technology metals.

The Back Story on Cinovec

My first encounter with this asset was when I was writing a tin sector review and came across Cobre Montana’s JV partner European Metals (ASX:EMH) which had signed an agreement back in 2013 to acquire some tin, tungsten and lithium assets in the Czech Republic. At the time Cobre Montana was not involved and European Metals was going it alone.

Parts of the Cinovec deposit were mined historically as a tin mine, with around 21.5kms of underground drives in place. According to European Metals, at the time of its acquisition, Cinovec was one of the largest undeveloped hard rock tin projects in the world, with “proven high metallurgical recoveries”. Interestingly in German the area is known as Zinnwald, which means Forest of Tin and the mineral from which the elements are extracted (zinnwaldite) is named after the place.

Tin has been mined in the Zinnwald/Cinovec district since the 14th century.  Underground mining ceased in 1972 in the central part of the Cinovec district, where near surface flat lying quartz-cassiterite-wolframite veins were mined. As the high grade ore was running out, the Czech state-owned mining company initiated an extensive underground exploration program southward of the Central Mine. Extensive underground drilling and tunneling defined significant blind tin-tungsten-lithium mineralization associated with greisenitization and silicification.

The picture below shows the mine in its heyday. In fact most of these structures still exist in a rather tumbledown state.

cinovec_historic

The northern part of the Czech part of the Cinovec district is less understood but known for extensive mining in the 18th and 19th century.

The initial attraction of the project for us was that it hosted an Inferred Resource of 28.1mn tonnes grading 0.37% Sn, 0.04% W, for total contained tin of 103,970 tonnes based on 83,000m of drilling undertaken by the Czechoslovakian Government in the 1970s and 1980s.

The aspect of Cinovec that prompted the JV with Cobre Montana was the Lithium component to the deposit but the project also has potential by-product tungsten, rubidium, scandium, niobium and tantalum. The historical resource estimated that it hosts a partly-overlapping hard rock lithium deposit with a total inferred resource estimate of 514.8 mn tonnes @ 0.43% Li2O.

cinovec_Li_reource

Trial Mining for Tin

According to European Metals at the time of the acquisition, the deposit appeared to be amenable to bulk mining techniques. Over 400,000 tonnes of material had been trial mined as a sub-level open stope and a feasibility study was completed by the Czech government.  All operations ceased with the demise of the centralized economy in 1990.

Historical metallurgical test work, including the processing of the trial mine ore through the previous on-site processing plant, indicates the ore can be treated using simple gravity methods with good recovery rates for tin and tungsten in oxide minerals of approximately 75%.

Being located right in the centre of Europe, Cinovec is well serviced by infrastructure, with a sealed road adjacent to the deposit, rail lines located 5km north and 8km south of the deposit and an active 22kV transmission line running to the mine.

Cinovec map

How Cobre Montana Fits In

Lithium is contained in lithium micas (mainly zinwaldite) and therefore concentrates in the gravity reject, from which the Li-micas can be concentrated by magnets. Lithium carbonate was produced on industrial scale during mining in the 1970s.

In mid-April, Cobre came out with an announcement that it had been able to produce its first battery-grade lithium carbonate from the Cinovec project. The key aspects were:

  • Carbonate purity exceeds 99.5%
  • achieved leach recoveries of 92%
  • leach residence time of 18 hours

These results, which included leaching and chemical extraction processes, were achieved on a 50 kg sample of ore from the Cinovec deposit. The tests included successful recovery of a potassium sulphate by-product.

The Scoping Study

The commercial implications of the aforementioned lithium results were included in the European Metals’ scoping study, which was published on 1st of May. The scoping study model combined the conventional tin and tungsten mining and recovery investigations with Cobre’s lithium extraction from the tailings discharge of the proposed tin/tungsten mining operations.

Feed for the lithium process plant comprises tailings from the tin-tungsten treatment process. The plant will treat lithium-bearing mineralisation via the following process:

  • flotation to concentrate zinnwaldite (lithium mica)
  • atmospheric leach to capture lithium in solution
  • precipitation of battery grade lithium carbonate and sulphate of potash
  • tailings disposal

Key assumptions in the cost estimates are:

Feed rate 2 mn tpa of tailings material

  • Lithium recovery 70%

The scoping study did caution though that EMH did not want to imply that Cinovec would produce at those production rates, or at any rates inside or outside of those figures, or at all, at any time in the near or distant future. A rather all-embracing “get-out” clause!

Based on these inputs, Cobre estimated the capital cost for the lithium processing plant at US$164 million and the estimated operating cost is US$39.14 per tonne treated, which resulted in a cost of less than $2,000 per tonne of lithium carbonate produced after sulphate of potash credits

The Deal

Back in late April, Cobre announced that it had signed a Heads of Agreement with:

  • 50/50 JV to process Cinovec’s tin tailings and produce lithium carbonate and associated by-products
  • Cobre will manage the JV with a technical committee comprising equal representation
  • Cobre will utliise the license right issued granted by Strategic Metallurgy P/L to the JV
  • Cobre will secure the technical support of Strategic Metallurgy
  • The JV will also cover opportunities in countries sharing borders with the Czech Republic
  • EMH will provide lithium-bearing tin tailings to the JV, following the extraction of Tin/Tungsten
  • The JV will compensate EMH on the basis of:
    • Tonnes of concentrate fed to the leach circuit
    • Concentrate to be priced to provide equivalent IRR to both the tin operation and the Lithium operation

Therefore Cobre Montana is dependent upon EMH getting to production, while in my estimation Cobre Montana looks like the better resourced of the two companies in terms of access to funds and financial acumen on board.

Conclusion

In reality a better solution than the JV at Cinovec would be a merger between Cobre Montana and EMH. To a certain extent the two companies are like a dance act, one does not work without the other and the solo version is not as effective, if at all. Does one count this as one project or two? Without the tin mine of EMH in production, the processing operation of Cobre Montana will be rather high and dry.

Being quite literally on the border with Germany. Cobre Montana is a natural to attract the attention of German investors. It has a Frankfurt Stock Exchange “listing” with the ticker:  A1W5R3. Trading volume has been perking up in recent times as the chart below shows.

Cobre_FSE_chart

With only two other Lithium deposits in Europe ever having come to our attention (one in Spain and one in Austria), the Cinovec project certainly ranks as the front-runner. The challenge now will be to rustle up the funds to move the project(s) forward towards production.


Christopher Ecclestone

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Comments

  • David Fogg

    Great summary of the situation at Cinovec. In the absence of a current broker’s report some evaluation of current fair prices for CXB and EMH plus future targets and timings would be very well received.
    Regards,
    David

    May 26, 2015 - 10:45 PM

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