As this article was written the week of Cheltenham Festival, a magnet for Irish racegoers, I looked at European Green Transition (EGT) in the same way one might the form and lineage of a fancied Gold Cup entrant.
EGT’s breeding could not be better. It is from the stable of Cathal Friel, the entrepreneur who helped build and sell Amryt Pharma for just shy of $1.5billion and who is performing the same magic with hVIVO and Poolbeg Pharma, two fast-growing healthcare plays.
In Michael Nolan, EGT’s other co-founder, you have one of the guiding lights behind Cove Energy, the gas explorer, which grew from a £1million IPO valuation to be acquired for £1.2billion. Both men have experience in knitting together distressed assets to create real value.
The production of rare earths, used in wind turbines, phones and car batteries, is dominated by China, a superpower not particularly well disposed to the West. So, finding sources of these minerals on the doorstep (geographically) is imperative
Experienced team
The same can also be said of CFO Jack Kelly via his work with Raglan Capital, while CEO Aiden Lavelle brings with him considerable experience in the minerals and mining sector, which will be key to this latest venture.
Crucially, chairman Friel’s team can access funds even in difficult times – a rarity in the current market.
Lavelle and Kelly will spearhead the EGT’s buy-and-build strategy. The business already owns three assets, including a highly promising rare earths play in southern Sweden.
On top of that it has a pipeline of 10 to 15 opportunities, Kelly told Proactive.
Broader remit
The original plan had been to focus on minerals required for the new green economy – rare earths, copper, cobalt etc.
But then it became apparent that restricting the pipeline this way might prevent the EGT from capitalising on the broader base of assets that have been uncovered, such as processing, tailings, solar and wind opportunities.
At the heart of EGT’s strategy is a piece of legislation that may have eluded many; it’s called the European Critical Raw Materials Act. It is designed to address the challenges of securing minerals used in the new circular economy.
For example, the production of rare earths, used in wind turbines, phones and car batteries, is dominated by China, a superpower not particularly well disposed to the West. So, finding sources of these minerals on the doorstep (geographically) is imperative.
Practically, the legislation governs extraction, processing, sourcing and recycling and provides a highly supportive framework for EU companies helping to support the act.
Demand surging
At the same time, the number of potential end users in Europe for transition metals such as lithium, cobalt and copper has mushroomed, creating demand for raw materials and processing capacity.
The company’s lead asset is the Olserum rare earths site, which has been designated a project of national interest by the Swedish Geological Society.
There is potential to ‘significantly scale’ the resource, which currently stands at 4.5Mt at 0.6 per cent total rare earth oxide in the indicated category and 3.3Mt inferred at 0.63 per cent (with a 0.4 per cent cut-off).
Next year, EGT should have an updated JORC estimate for the site as well and start the process to land a 25-year exploitation permit.
It also owns Pajala, in the north of Sweden, which is prospective for copper, cobalt and graphite. Meanwhile, its projects in Saxony, Germany, are host to a host of elements including (but not limited to) lithium, rare earths and cobalt as well as tin, tungsten, lead and zinc.
Financial heavy lifting
The plan with the current batch of assets is to get them each to a point where a partner can be brought in to carry out the financial heavy lifting and complicated engineering required to get a mine into production.
EGT would receive a free carry through this heavy investment phase and maintain a minority stake, CEO Lavelle said.
‘Our business model is to advance the assets and then tie up with a miner,’ he added. ‘It’s not our intention to actually start mining ourselves.’
Where it gets very interesting is the array of opportunities open to EGT against a backdrop of rock-bottom valuations and a dearth of cashed-up willing buyers.
Potential targets include assets held by public companies listed in Australia, Canada and the UK as well as private businesses.
There are two assets under consideration; processing facilities, one of which has generated meaningful revenues in the past.
Rare expertise
The other offers technological capabilities, rare outside of China, and presents a strategic opportunity for EGT to differentiate itself.
Both potentially offer exceptional value, according to CFO Kelly. ‘They also very much fall into the track record of the team in that they are turnaround situations,’ he added.
EGT has signalled its intention to float on AIM, and it is understood there has been no shortage of interest from potential backers of this latest venture from the Cathal Friel stable.
Only time will tell whether the team’s turnaround expertise will succeed in the European energy transition sector in the way it has in healthcare, oil and gas.
Having studied the form, EGT is short odds to be a success – even if the conditions aren’t ideal.
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