European Lithium’s $835 Million Merger With Critical Metals Hinges on Closing a Cash Gap

European Lithium shares rally 60% on A$1.2B all-share merger with Critical Metals Corp, but a A$24M cash shortfall threatens to stall the deal before closing.

Investors have piled into European Lithium after the company unveiled an all-share merger with Nasdaq-listed Critical Metals Corp that would consolidate control over rare earth projects in Greenland and a lithium development in Austria. The deal, valued at roughly A$1.2 billion ($835 million), has triggered a dramatic rally — but a liquidity shortfall threatens to stall the transaction before it can close.

Shares of European Lithium surged as much as 60 percent on the Australian Stock Exchange following the announcement, while Critical Metals jumped more than 25 percent to $14.45 in New York. Over the past 30 days, European Lithium has gained over 114 percent as speculation about the tie-up intensified.

The merger would unwind a complex cross-shareholding structure. European Lithium currently owns about 34 percent of Critical Metals, representing roughly 45 million shares. Those holdings will be cancelled as part of the transaction, reducing dilution for existing Critical Metals shareholders and boosting the free float.

Under the terms of the deal, European Lithium shareholders will receive 0.035 Critical Metals shares for each share they hold, equating to about A$0.58 per European Lithium security.

Greenland’s Tanbreez Prize

The combined entity would gain full control over two strategic assets. Critical Metals has been steadily building its stake in the Tanbreez rare earth project in southern Greenland, where a pilot plant near Qaqortoq is already operational. Recent metallurgical tests delivered concentrate grades of nearly 3 percent with recovery rates exceeding 85 percent. The project is targeting a production start in May 2026, pending regulatory approval.

European Lithium brings the Wolfsberg lithium project in Austria to the table, which already has a completed feasibility study. The timing aligns with a broader push by Western governments to secure supply chains for critical minerals — the U.S. and EU signed a joint declaration on the subject just days before the merger was announced.

The A$24 Million Hurdle

Despite the market euphoria, the transaction carries a strict condition that European Lithium must hold minimum cash reserves of A$330 million at closing. As of the end of March, the company had roughly A$306 million in the bank — a shortfall of about A$24 million.

Complicating matters, European Lithium is simultaneously running a share buyback program of up to 10 percent of its own capital, estimated to cost around A$12.6 million. Every share repurchased reduces the cash pile that needs to grow for the merger to proceed. The company had previously cancelled millions of performance rights by mutual agreement to prevent further dilution.

An exclusivity agreement between the two parties runs until early May. A binding contract has yet to be signed. If the boards reach a final agreement, European Lithium shareholders will vote on the proposal at a general meeting in the third quarter of 2026. Assuming both shareholder and regulatory approvals are secured, the merger is expected to close in the second half of next year.

The consolidation would simplify future financing and development decisions for both projects, particularly Tanbreez, which would come under single ownership. For now, management faces the delicate task of bridging the liquidity gap while keeping the buyback program on track — a balancing act that will determine whether this rare earth mega-merger reaches the finish line.