Shares in Savannah Resources (AIM: SAV) fell as much as 35% in early trading on Wednesday after revealing the sudden exit of its chief executive and having to complete an additional environmental licensing step for its flagship Mina do Barroso lithium project in Portugal.
The company said CEO David Archer was stepping down immediately after almost nine years in the post and is being succeeded on an interim basis by Dale Ferguson, the miner’s technical director.
Savannah Resources also said that Portugal’s environmental regulator, Agência Portuguesa do Ambiente (APA), has decided that Mina de Barroso’s Environmental Impact Assessment (EIA) process should continue under Article 16. This is an intermediate and optional step in the EIA evaluation process, after which APA will make its final Declaration of Environmental Impact (DIA) decision.
Savannah has up to six months to work with APA on certain aspects of the project’s design and associated environment, ecology and socio-economic considerations, based partly on feedback from stakeholders. It would them resubmit them for consideration.
Interim CEO Dale Ferguson said the additional step in the licensing would add to the overall development schedule, but within a clearly-defined timeline.
“Savannah’s team will make its best endeavours to submit any revised plans to APA as soon as practicable, but under the legislation, a DIA decision would be reached no later than March 2023,” Ferguson noted.
While technical issues are usually easy to address, analysts note that opening the project’s EIA to comment from local stakeholders be a problem.
“There is considerable local opposition to this mine in Portugal. The more local the consultations, the more likely it is that a spanner will get thrown in the works,” Tim Worstall from Asktraders.com wrote.
“Socio-economic considerations include the impact of the project on other local businesses, which is anywhere between not a worry and a very large worry,” he noted.
The company’s shares closed 30.8% down in London at 2.3 pence each, leaving the miner with a market capitalization of £32.9 million ($39m).
Savannah Resources had hoped to secure EIA approval for the project this year, as Mina de Barroso is poised to become Europe’s largest lithium mine, which would help the old continent reduce its dependence on fossil fuels and speed up its “green transition.”
The company acquired a 75% interest in Mina do Barroso in May 2017, maintaining a fast paced development approach since. January’s snap parliamentary election in Portugal, chairman Matthew King recently said, impacted the timing of the assessment as meetings with government officials were postponed.
Mina do Barroso holds a resource estimate of 27 million tonnes of lithium with over 285,900 tonnes contained Li2O, at an average grade of 1.06% Li2O, which the company believes to be enough to supply a “material proportion” of Europe’s lithium demand over the coming decades.
The mine will also yield a feldspar and quartz co-product used in the ceramics industry, which will be sold to customers locally and in neighbouring Spain.
Recent results from the latest phase of metallurgical test work program at the mine highlight the potential for lower capital and operating costs than those originally estimated.
Portugal, already Europe’s top lithium producer, accounts for about 11% of the global market, but its output is entirely used to make ceramics and glassware, which is why Europe relies on lithium imports from Latin America’s Lithium Triangle, as well from Australia and China.