European Metals : Annual Report 30 June 2020

EUROPEAN METALS HOLDINGS LIMITED

ARBN 154 618 989

ANNUAL REPORT

30 JUNE 2020

EUROPEAN METALS HOLDINGS LIMITED

ABRN 154 618 989

ANNUAL REPORT 30 JUNE 2020

CORPORATE DIRECTORY

Directors
Mr Keith Coughlan
Mr Richard Pavlik
Mr Kiran Morzaria
Company Secretary
Ms Julia Beckett
Registered Office in Australia
Suite 12, Level 1
11 Ventnor Avenue
WEST PERTH WA 6005
Telephone [phone]
Facsimile 08 6245 2055
Emailwww.europeanmet.com
Registered Office in Czech Republic	Registered Address and Place of Incorporation - BVI
Jaselska 193/10, Veveri	Rawlinson & Hunter
602 00 Brno	Woodbourne Hall
Czech Republic	PO Box 3162
Tel: [phone]	Road Town
Tortola VG1 110
British Virgin Islands
Share Register - Australia	UK Depository
Computershare Investor Services Limited	Computershare Investor Services plc
Level 11	The Pavilions
172 St Georges Terrace	Bridgewater Road
Perth WA 6000	BRISTOL BS99 6ZZ

Executive Chairman Executive Director Non-Executive Director

Nominated Advisor & Broker Beaumont Cornish Limited Building 3

566 Chiswick High Road LONDON W4 FYA UNITED KINGDOM

Telephone Telephone Facsimile Facsimile

UNITED KINGDOM
Reporting Accountants (UK)
Stantons International Audit and Consulting Pty Ltd	Chapman Davis LLP
Level 2, 1 Walker Avenue	2 Chapel Court
West Perth WA 6005	LONDON SE1 1HH
Telephone [phone]	UNITED KINGDOM
Facsimile [phone]
Securities Exchange Listing - Australia	Securities Exchange Listing - United Kingdom
ASX Limited	London Stock Exchange plc
Level 40, Central Park	10 Paternoster Square
152-158 St Georges Terrace	LONDON EC4M 7LS
PERTH WA 6000	UNITED KINGDOM
ASX Code: EMH	AIM Code: EMH

1300 850 505 (within Australia) [phone] (outside Australia) 1800 783 447 (within Australia) [phone] (outside Australia)

Auditor

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EUROPEAN METALS HOLDINGS LIMITED

ABRN 154 618 989

ANNUAL REPORT 30 JUNE 2020

CONTENTS

Chairman's Letter Report 3

Project Review 5

Directors' Report 8

Remuneration Report 13

Auditor's Independence Declaration 22

Consolidated Statement of Profit or Loss and Other Comprehensive Income 23

Consolidated Statement of Financial Position 24

Consolidated Statement of Changes in Equity 25

Consolidated Statement of Cash Flows 26

Notes to the Consolidated Financial Statements 27

Directors' Declaration 59

Independent Audit Report to the members of European Metals Holdings Limited 60

Corporate Governance Statements 64

Additional Information 78

Tenement Schedule 79

EUROPEAN METALS HOLDINGS LIMITED

ABRN 154 618 989

ANNUAL REPORT 30 JUNE 2020

CHAIRMAN'S LETTER

Dear Shareholders

Welcome to the 2020 Annual Report for European Metals Holdings limited ("European Metals" or "the Company").

On behalf of the Board of Directors, I am pleased to report to you on what has been another busy and transformational year for your Company. Our strategy is to become a Czech based lithium and tin producer and we have made significant advances through the year towards making that aim a reality.

The Project has been significantly de-risked and at the time of this report is moving rapidly towards a final investment decision.

The year was marked primarily by the completion of an agreement with CEZ a.s., the Czech national power utility, by which CEZ became a 51% shareholder of the Project Company, Geomet and injected approximately EUR 29 million into the Project. This agreement not only provides all necessary funding to move the Project to final investment decision, it also provides strong business and management support within the Czech Republic.

CEZ is an established, integrated energy group with operations in a number of Central and Southeastern European countries and Turkey. 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. CEZ Group has 33,000 employees and annual revenue of approximately EUR 7.24 billion. The largest shareholder of its parent company, CEZ a.s., is the Czech Republic government 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 capitalization is approximately EUR 9 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 Czech is a significant contributor to GDP and the number of EV's in the country is expected to grow significantly in coming years.

In addition to the partnership with CEZ, the Company announced post balance date, a partnership agreement with EIT InnoEnergy, a European Union body that is the principal facilitator and organiser of the European Battery Alliance (EBA). The EBA was initiated by the European Commission to create a competitive and sustainable battery cell manufacturing value chain in Europe.

The purpose of the partnership agreement with EIT InnoEnergy is to facilitate the accelerated construction financing and ultimate commercialisation of Cinovec. This will be achieved through assistance in the sourcing of construction finance, grant funding, and offtake introductions and negotiations.

There has been significant recent commitment within the EU to building a sustainable European Battery industry and Electric Vehicle industry. In July, the EU approved a Green Stimulus Package of in excess of EUR 500 billion to address climate change and ensure a green energy future. This, coupled with a growing global desire to develop local supply chains, has focused attention on European based projects involved in the battery metals supply chain. Cinovec is set to benefit significantly from these developments.

Global lithium prices continue to be depressed, largely due to the recent upheaval in the spodumene concentrate market. We believe that this upheaval, combined with the macro factors outlined above strongly supports our strategy of becoming an integrated producer of lithium hydroxide and/or lithium carbonate supplying directly into the European market. This strategy eliminates counter party risk and delivers European product into the rapidly expanding European EV and battery storage markets. We see a strong recovery in lithium prices.

The deposit is uniquely located, being in the centre of the Czech and European car industry and proximal to a large number of new and planned battery factories. Europe has recently overtaken China as the largest producer of Electric Vehicles globally and the EC has released an action plan on critical raw materials to ensure a more secure and sustainable supply.

The Project Company recently appointed SMS group, a German based world leading engineering firm as the lead engineer for the minerals processing and lithium battery-grade chemicals production at Cinovec. This marks the beginning of the formal Front-End Engineering Design study as the major component of the ongoing Definitive Feasibility Study. This detailed engineering contract, along with advances in permitting and offtake discussions moves us closer to development of Europe's largest hard rock lithium resource for the benefit of all stakeholders.

EUROPEAN METALS HOLDINGS LIMITED

ABRN 154 618 989

ANNUAL REPORT 30 JUNE 2020

CHAIRMAN'S LETTER

At a board level, our Chairman Dave Reeves resigned at the end of the year. Dave was instrumental in bringing the Cinovec Project to the Company in 2013 and the development of the Project since. Dave's workload in his Executive role with another mining project has increased dramatically and requires a great deal of his time. We are very sorry to see him leave and wish him all the very best with his future endeavours.

Finally, I would like to take this opportunity to thank all staff, advisors, contractors and our shareholders who have supported us over the past year.

I look forward to updating you throughout the new financial year as we continue to advance the Cinovec Lithium/Tin Project.

Keith Coughlan

EXECUTIVE CHAIRMAN

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