Portugal's lithium exit clouds European Lithium merger

Salvador de Mello, group chief executive of the José de Mello Group, confirmed on 12 August 2026 that Lifthium Energy, the group's green lithium subsidiary, will not proceed with its planned €492 million lithium refinery in Estarreja, Portugal. The withdrawal removes one of the most prominent downstream processing bets in Iberian critical minerals.

"Despite all the effort that was made to secure long-term contracts to allow investment in a factory, this was not possible, therefore we will not proceed at this stage with an industrial investment in lithium. Unfortunately, market conditions in the European automotive industry and the battery and lithium supply chain are not meeting our expectations." — Salvador de Mello, CEO, José de Mello Group.

The decision lands at an awkward moment for European Lithium (ASX: EUR, FRA: PF8), whose proposed merger with Critical Metals Corp is working toward a completion date later in 2026. European Lithium develops the Wolfsberg hard-rock lithium project in Carinthia, Austria, targeting battery-grade lithium hydroxide for European EV manufacturers, and holds a 31 percent stake in Critical Metals, whose flagship asset is the Tanbreez rare-earth deposit in Greenland. BMW entered a long-term offtake agreement for Wolfsberg output in December 2022 and made a $15 million prepayment, providing a demand anchor that Lifthium could never replicate.

Lifthium's failure to secure offtake contracts is the sharper story. The project had been designated a Strategic Project by the European Commission under the Critical Raw Materials Act and had attracted €180 million in public support that was never drawn down. The Commission's strategic designation proved insufficient to generate paying customers. Lithium carbonate equivalent prices, which exceeded US$80,000 per tonne in late 2022, now trade in the US$8,000 to US$10,000 per tonne range. At those levels, the investment case for a greenfield European refinery collapsed regardless of policy support.

The cancellation sharpens the contrast with Savannah Resources, whose Barroso lithium mine in Portugal advanced a final feasibility study on the same day Lifthium's withdrawal became public. The two outcomes illustrate the sector's division between projects with defined mine plans and those dependent on downstream capital that has yet to materialise.

For the merger itself, the cancellation arrives alongside turbulence at Critical Metals. Freedom Broker cut its price target on Critical Metals stock from US$17 to US$8 and moved its rating from "Buy" to "Hold," citing Tanbreez project development trailing the timeline set out in the 2025 preliminary economic assessment. The downgrade contrasts with Cantor Fitzgerald's July 2026 initiation of Critical Metals at a speculative buy with an US$18 price target, describing Tanbreez as having exceptional characteristics.

European Lithium shares closed at €0.1790 on Tuesday, down 3.1 percent on the day and 5.7 percent over the week. The stock sits 41 percent below its 52-week high of €0.3055, reached in early June, though it has gained 98 percent since the start of the year. The company also applied to the Australian exchange during the period to list 193,019 new ordinary shares arising from the exercise of existing options, a routine step that nonetheless extends the share count ahead of the combination.

Under the merger agreement, updated on 19 August 2026, European Lithium shareholders are expected to hold approximately 41 percent of the combined Nasdaq-listed entity once the schemes of arrangement are completed.

"The amended terms reflect the continued commitment of both companies to completing this combination in a way that protects securityholders on both sides equitably against short-term market volatility." — Mike Hanson, Board Director and Special Committee Lead, Critical Metals Corp.

Portugal just demonstrated that a European Commission strategic badge and €180 million in public support cannot substitute for a customer. Every upstream Iberian lithium producer is now selling into a processing chain with one fewer anchor buyer, and the CRMA's credibility as a demand-creation instrument is under active scrutiny at the worst possible moment for a merger still requiring investor confidence to hold.