Metal Movers: Savannah CEO eyes lithium deal

Chris: Hello. And welcome to "Argus Metal Movers." My name is Chris Welsh, reporter for Argus Battery Materials in London. And today, we're taking a closer look at one of Europe's most watched upstream projects, Savannah's Barroso mine in northern Portugal, and the wider implications of its newly awarded €110 million grant. I'm delighted to be joined by Emanuel Proença, chief executive at Savannah, the company behind what could become Europe's first hard rock lithium mine, and one of its strategic projects under the Critical Raw Materials Act.

Savannah has been navigating permitting challenges, political change, and shifting timelines for years, with it now set to begin production in 2028. But its latest funding approval marks one of the most meaningful forward steps yet. And it comes at a moment when lithium prices, especially in China, are surging to two year highs, and reshaping market expectations. Emanuel, thanks very much for your time.

Emanuel: Thank you. Pleasure to be here.

Chris: Let's start with the context around the grant itself. This was announced only a couple of weeks ago. It's €110 million award split between early stage capital support and longer term performance bonus. And it lands at a critical moment for Barroso in its crucial year, as you said. Clearly, it strengthens credibility with lenders. But could you walk us through what the grant actually means for operations and what the Portuguese and EU authorities might expect Savannah to deliver in return?

Emanuel: Sure. Well, it does further reinforce that we're doing the right thing, first. And second, that Europe is serious about developing this battery value chain starting from mining. And we're very conscious that it is an important step forward. It further de-risks the project. It further accelerates the deployment of capital from other sources. It further reinforces that we are in a good footing, both with Portuguese governments, with local authorities, and that we are accelerating to execution.

From a contract perspective, it is a pretty simple grant contract. It requires us to progress according to the plan. It obviously requires us to do high-quality projects, which was already what was supposed to happen after we got the environmental approval a few years ago. And as we progress to execution, we're more and more confident that we can deliver a very high-quality project. So, that's very consistent with what we were doing. It also tells us and forces us to be ready for a start of construction around the end of this year, which is, again, very consistent with the timeline that we had.

So, everything is pretty much aligned with our exercise. And it is very good to see that we not only have more money available from a capital pool, and on top, a non-reinforceable pool, provided that we do everything according to plan. It also further reinforces, and it is also important that it is a program under which we have aligned incentives with the Portuguese state, with ISEP, the foreign investment development body. And in alignment with from the CRMA and the local authorities to develop these projects.

What they expect us to do is high-quality projects that delivers value for the country, for the local communities, for those that will be employed in the project. So, pretty standard and pretty aligned with what we want to deliver. So, it's really motivating to have this.

Chris: Brilliant. There's a performance bonus element as well. Paid only between 2031 and 2042. So, quite a long way away. It's unusual, I guess, to see a long tail incentive structured this way. Can you say more on what targets or metrics Savannah has to meet to qualify for that? And how much flexibility you have if conditions shift, prices change?

Emanuel: It is not very relevant in the sense that I would look at these grants as a €75 million to €80 million grant supporting construction with then a set of further adjustments. So, these further adjustments are mostly associated to how the project develops, and also how profitable the project is. And it's alignment between the country and the company. Again, obviously the country doesn't want to be deploying money that is not used in a sensible manner, and does not add value to the country by reinforcing excessively the returns on investment of a given project. So, it's mostly adjustments of returns on investment that you have there. So, the most important element of this is the first step in which we are spending to build. And by spending to build in the process, we get some of the money back through these €75 million to €80 million supported start.

Chris: Sure, sure. So, no specific production targets or financial returns as [inaudible 00:05:16]

Emanuel: You have them, but they're very conservative even with what we want to achieve. So, that's pretty sure that we will get there. Then it's mostly on the profitability. If we have too much profitability, we don't need to get the extra amount. If we have the level of profitability that the program deems adequate, then we have these extra supports. So, again, it's the €75 million to €80 million at starts that are most critical and important for us.

Chris: Got you. I want to talk a little bit about cost. There's been some tension on Barroso's delays, but perhaps less tension to where Savannah sees its cost position versus other hard rock projects in Europe and globally. You haven't done a [inaudible 00:05:59] study yet. I think that you mentioned that might be coming later this year. But to speculate on cost, the asset is higher grade than other lithium projects. And its scale of potentially 200,000 tons a year is similar to say some of the Australian hard rock mines. But then on the other hand, you've got compliance and labor costs in Europe that might harm this. What could you say about what will give Savannah or Barroso a competitive edge on cost, geology, infrastructure, and so on?

Emanuel: It's very interesting because this project is one that goes a bit against the assumptions. People will assume that a project in Europe is very hard to deliver. Well, we are delivering it. People will assume that the countries and Europe are not serious about developing these things. And now we have a grant that further confirms that they are serious on top of having confirmed that we are a strategic project under the CRMA, having spoken about our project. Ms. von der Leyen and Mr. Séjourné have spoken about the project. They have asked us to attend visits with them to other states leaders. We went to Japan, for example, later last year, and so on and so forth. So, it's proving that yes, Europe is serious, and it's also proving that yes, local governments and national governments can be serious.

People also assume that you have tremendous local backlash. And what we have seen is that when you do serious work on the ground, and when you engage directly with everyone absolutely every day, then the tide turns, and people start to understand that there is a real opportunity for value and for transformation of their lives for the better with projects like this. So, it is very interesting that this project kind of goes up against some of the things that people would stand to assume.

On the cost, it's the same. So, people will say, "Well, but you are in Europe, you have tremendous labor costs." When you look at the details, the costs that we will have in terms of labor are actually brutally competitive. And it's very interesting to see that when you are in the middle of the Pilbara, you're 2000 kilometers away from the coast, you have to do fly-ins, fly-outs, you have to pay extra for the right skills that need to be transported to sites every two weeks, you get to tremendously high costs. Same thing with developing a project in Africa or in other locations, you tend to have rather high to very high labor costs.

In Portugal, what you get is a very skilled workforce, and people tend to have high to very high qualifications. And in this particular region, you are in interior Portugal. So, there is a tendency for very high, potentially very high quality of life at low costs. And so, our labor costs are actually very, very competitive when comparing to some of the projects elsewhere. Now, you need to comply with a very stringent regulation, and you do need to have a very high-quality project. But that's what we have from the moment where we were approved from an environmental perspective.

We have a project that reuses water, we have project that does backfilling, that has no harmful chemicals, and so on and so forth. So, you do need to do that. But again, when you factor all of those things in, yes, you can tend to have a slightly higher CAPEX than you would do elsewhere, but that is totally countered by the quality of the resource and the quality of the project. And as you referred, Chris, we're lucky to have a very good resource endowment. It's a good rate, a great size. Some of your bodies are easy to get to, so the strip ratio becomes very good. The mineralogy is brutally clean, so we can get high recoveries.

Now, actually, at scoping study, we're assuming recovery rates that are very consistent with the high-quality mineralogy. What we get in the lab is consistently 5 to 7, 8, 10 points above what we are assuming in the study. So, when you look at all of these things put together, you get to a very competitive project, although it is in Europe, although it complies with European regulation, and so on and so forth.

And so, last but not least, people tend to assume that building industrial projects in Europe is doomed because it won't be competitive. Well, these projects, and other projects in the value chain, by the way, do confirm that the truth tends to be the opposite actually. And there are a few things that are good in Europe also. In Portugal you have power costs that are very competitive at this stage, and are becoming even more competitive with the penetration of very low-cost renewables, for example. So, some of these aspects of being in a country in Europe, other aspects like logistics, that is amazing, we need to build a road, and that's an important cost for us. But that road directly connects to a high-quality highway. And in two hours you can be in one of five good and well-structured ports. Those things pay off and those things help.

Chris: So much to talk about. I'm sensing that on cost perhaps where you might be spending more on compliance, you might make up some, as you mentioned, on power. But also on transport to conversion facilities as opposed to Australia shipping their hard rock to China or from Africa as well. Part of that transport cost is affected by the conversion. Many listeners will remember Galp's original plan to build a lithium refinery, which was dropped in late 2024. So, that in-country refining would lower transport costs, as you mentioned.

Could you shed any more light? Are you changing your approach to securing offtakes? Actually, firstly, the competitive cost that you mentioned, could you put a number on that? And also are you changing your approach to securing offtakes off the back of Galp's plans or dropping their plans?

Emanuel: So, it's two very important questions. I'll take the cost one first. At scoping study stage, we have a break-even cost of $600 per ton. And all mean sustaining costs closer to the 400 and something dollars per ton. Obviously, there needs to be adjustment to these numbers, inflation has kicked in, and so on and so forth. But we are looking at the DFS that will show how competitive this project is. You refer that that should come later in the year. We're pointing towards the DFS [inaudible 00:12:38] around half this year. So, by summer European time we should deliver our DFS around summer, and European time again.

So, that DFS will further confirm that this is a high-quality project from a cost perspective. And we anticipate that we would want to be and think we can be in the second port [inaudible 00:13:04] the global cost curve for lithium. That includes spodumene and brines. When you look at spodumene, we are in the ballpark figures of PLS costs, for example. So, that would show how competitive this project can be on FOB basis. And then from the FOB basis comes your second question. Where do I ship this to? How much additional freight do I need to put in? How much additional logistical hurdles do I need to put in? And also how much do I serve the cost of diversification of sources and diversification of developments of the lithium battery value chain?

And that's where, again, we come back to this assumption that Europe cannot do anything. Northvolt was a tough story. Galp wanted to do refinery and then stepped out. They may come back in the future, but I wouldn't take that for granted today. And you look at where we are fast forward the year and a bit. And AMG has its hydroxide finishing plants operating and running. Caliber [SP] is about to start its refinery. And it's a spodumene to hydroxides project, so from one end to the other. Although with the need and the opportunity to put in a few more sources of product in the process.

In parallel to our grants there was a signature of four grants on the same day for the battery value chain. It was us, it was Lithium, a Portuguese company with a refining project, actually very good refining project. This is a chemical company. They've been doing things like this for 150 years. They know a lot about what they're doing, so that's a very good project. You have Topsoe [SP]l, the Danish that will be developing CAM plants in Portugal. You have Galp, the Chinese that will be doing battery plants in Portugal. And in parallel, in Spain you also have another CAM producer, a Chinese CAM producer. You have a CATL accelerating, and so on and so forth.

So, when you look at all of these, it actually looks like there will be other ways of putting the product into the market. Chinese players are also working on building a refinery in Morocco, which is just around the corner for us. American companies are opening a couple of refineries now, so that's also a further opportunity for us. So, when we look at the spectrum of what will happen, and is already happening, and we'll have results over the coming two to five years, there is a set of opportunities to put this product to the good service of the development of a European battery value chain, and of shipping the product not to the other side of the world but much closer to us.

Now, if we still need to put a product onto the other side of the world for a while for the first years, then that's still okay for us. The economics still holds very well. But at this stage what we have is we've done our first offtake agreement, and that was with AMG. And we're very conscious that we want and need to be a source of positive developments for the battery value chain in Europe. And we're seeing things come through, we're seeing results starting to happen.

Chris: Brilliant. You mentioned lithium. If I'm not mistaken, the conversion...their process uses brine and recycled lithium sulphate [inaudible 00:16:49] so not spodumene. So, it's not quite a like for like. Do you have any concrete plans, or it's still...the sentiment is good but it's still not quite confirmed?

Emanuel: Yes, it is a very good point. They actually go mostly from the sulphides further down. And we will hopefully announce something over the coming weeks in which we cooperate with them in a scenario that adds spodumene to the picture.

Chris: Brilliant, brilliant. Okay. I wanted to talk a little bit about community land access, community engagement as well. It was cited as one of the reasons for the latest delay to 2027-2028. Does Savannah have a plan for securing the remaining land this year? And how have relations evolved since the sort of turbulence of a couple of years ago, political and regulatory?

Emanuel: Yeah. So, the land issue that happened over the course of last year was mostly associated to political developments in country. '25 was a year of elections in Portugal, of a sequence of elections through the year. And so, the processes associated to lands went through all the technical steps throughout the year. All the technical steps were cleared, but we needed an extra final political step. And that final political step was kind of dragged by these elections and election moments. You tend to have a bit of a delay on the processes. So, we still would prefer to be spinning up a bit more than what we are in that front, but all the evidence shows that the technical side of things is done, and the political side of things now on top of the confirmation of supports through the grants should come very soon.

So that's more or less in the control. And much more in the control, especially given these grants. On the consideration associated to local communities, back to what I said before, Chris, working with boots on the ground, hiring local, being very open and very transparent about what we're doing. We have a monthly radio program with a local radio, we have a bi-monthly newspaper in which we say everything that we're doing. We speak about things that we will do before we do. We open our gates every month to month and a half to do a community event in which people in the order of 150 to 250 tends to attend. We do community meetings very frequently.

We're just about to close small but important agreements with hunting associations over there. I spoke to the mayor, I was in meetings with the mayor twice this week. All of that effort has proven to dramatically shift the way the project is perceived on sites. And that dramatic shift is obviously to our interest, and it is to the interest of the local community. In a project like this, if you were working in another project that there was a big highway or a dam or something like that. The same thing would happen in a project like this. You need to deserve the trust of those that are in the region absolutely every day. But I think we are in a very good position today. And if we keep doing a very good job we will benefit from the support of the local community.

Emanuel: I was going to say just about your own point. I think that the string of grants that you mentioned in recent weeks from top down suggest that there may be a bit of a sea change in perception. Who knows? Finally, I don't want to keep you for too long, I want to look ahead slightly. Does Savannah see perhaps any potential for phase two development in Portugal? I know you're very concentrated on where you are at the moment. Well, the processing we already touched on that. Especially given the current price environment, so I guess it's a slightly two-pronged question, given that the demand side is looking strong in the coming years. Does that sort of open up any options for any phase two development?

Emanuel: It's the quality of the resource that opens that option, so it's not the price environment, it's the quality of the resource and its size. In September we released the resource update. In that resource update we measured the need to get it to the order of the high 20s in the millions of tons of resource. We moved the whole resource to very close to 40 million tons, and we added an additional exploration target that is in between 35 million and 62 million tons of additional resource that you can put in. So, you can be looking at a project that will at some point surpass the 100 million tons in mineral resource. And that shows that the project becomes big.

When you're working on a first stage plant that is of 1.5 million tons in 200,000 tons of good quality spodumene out, you put the maths together and you understand that, yes, there could be at some point the opportunity to scale up. But now we're fully focused on making sure we get to the finish line on this first project. There is also an opportunity for further refineries to be developed. We have spoken about this, and AMG has also spoken about it. AMG has a plan that will potentially include at some point adding the spodumene to carbonate bits, potentially in Portugal. That would add another refinery to the table. We're speaking to others that could and are certainly interested in adding refining capacity in Europe or around Europe in [crosstalk 00:23:02] coming years.

Chris: This is battery grade, is it?

Emanuel: Yes, correct. So, when you look at these things, the resource is there, the competitiveness of the resource is also there, the value chain is being developed, and so all of these things will be put together. But for now, full focus on delivering our first stage of the project. And then the future will hopefully be bright.

Chris: It's a big year ahead, isn't it? You've mentioned [inaudible 00:23:28] visibility study in the summer and plenty more after that. We better leave it there. If you would like full access to Argus' prices and reporting across the battery materials value chain, do head to https://url.uk.m.mimecastprotect.com/s/bJM-Cp8XJtmgqgPHkFkIGN8ZO?domain=argusmedia.com. But for now, Emanuel, thank you very much for your time today.

Emanuel: Very good, Chris. Thank you. Thanks, everyone.