Electric cars are stubbornly hard to sell. Yet their numbers are expected to increase over the next few years, with eco-conscious politicians determined to phase out combustion engines.
Last week, news emerged of Government plans to subsidise electric vehicle (EV) purchases with cut-price loans. Lithium batteries are essential in EVs, and it is an industry dominated by China. But having designated lithium as a strategic mineral, EU ministers are keen to foster domestic production, investing in home-grown mines.
Portugal-based Savannah Resources has the largest and highest-quality deposit of lithium in Europe and expects to be in production by 2027, when demand for the mineral is forecast to increase. The group spent years evaluating its resource, ensuring environmental standards are met and working with communities to address their concerns.
Now chief executive Emanuel Proenca, 40, is set to build a mine and move to production.
He has made significant progress since taking over in September 2023, including a deal with Dutch-listed lithium refiner AMG. The group invested £16 million in Savannah, and agreed to purchase up to 90,000 tons annually for five years, a contract designed to help Proenca move into production.
AMG is Savannah’s largest shareholder but more deals are expected over the next two years. Savannah’s lithium has been recognised as extremely high quality and the group expects to produce around 200,000 tons a year, leaving plenty to spare for other refiners and manufacturers.
Added endorsement came just before Christmas when Euler Hermes, an export credit giant backed by the German government, said Savannah should be eligible for a loan guarantee of up to $270 million (£218 million). Total mine construction will cost around $350 million (£282 million)but interest from the Germans makes loans and other agreements easier to secure.
Midas recommended Savannah in 2022, when the stock was 4.2p.
A year later the Portuguese authorities started investigating environmental grants issued in Savannah’s mining location.
The group denied any wrongdoing but shares dropped to below 2p. They have bounced back after sustained buying from local investors and tangible support from AMG and the German authorities. Savannah has a busy time ahead but Proenca has proved he is up to the job and keeps finding new lithium too, which should boost sales.
Midas verdict: Europe is keen to build a home-grown lithium market and Savannah Resources has a key role to play. At 4.3p, the shares should prove their worth to new and existing investors.
Traded on: Aim Ticker: SAV Contact: savannahresources.com
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