CINOVEC, Czech Republic (Reuters) - Mining for lithium could start in the Czech Republic in two years, exploiting Europe’s largest resource of the metal that is used in batteries for electric vehicles and home power storage.

The deposits lie around Cinovec, a village with a tradition of mining since the 14th century and situated near the border with Germany, the industrial powerhouse at the heart of Europe’s bid to build electric cars and develop battery technology.

The resource, a term used for a deposit whose extent has yet to be proven by exploration, could amount to 1.3 million tonnes, or about 3 percent of the global lithium stock, according to the Czech Geological Survey.

That would rank the Czech Republic behind Chile, China, Argentina, Australia and other nations with bigger lithium reserves. But surging global demand and hungry European industry are sparking international interest in the Czech deposits.

Australia’s European Metals, which bought exploration rights around Cinovec in 2012 and wants to start mining by 2019, said the resource could yield 20,800 tonnes a year of lithium carbonate, the processed ore that is sold to customers.

Global demand is expected to rise three-fold to 535,000 tonnes of lithium carbonate equivalent by 2025 from 2015, due to the boom in electric cars and electricity storage that has added to demand from making mobile phone batteries, Deutsche Bank said.

European Metals has dug exploratory shafts and plans to spend $393 million to develop the site near Cinovec, a village surrounded by forests and meadows and showing scars of surface mining for lignite that once employed many people in the area. The region now has the Czech Republic’s highest jobless rate.

“The permitting process is going along as it should be, everything is happening in an orderly fashion,” European Metals Managing Director Keith Coughlan told Reuters.

The company has signed a memorandum on supply of lithium ore to HE3DA, a Czech startup battery producer.

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“HE3DA can be one of the biggest consumers,” HE3DA chief executive and founder Jan Prochazka told Reuters.

LOCAL SUPPORT

There are also other potential clients nearby. Daimler, owner of Mercedes-Benz, began construction in May of its second factory for lithium batteries, worth about 500 million euros, in Kamenz, a German town 90 km (56 miles) from Cinovec.

Tesla Motors Inc. has also announced plans to build another “Gigafactory” for batteries, possibly in Europe, to match its plant in Nevada, the United States.

European Metals still has steps to take before it can develop the mining site at Cinovec. It has to apply for permits from the State Mining Administration (SMA), a process that could last more than a year, an SMA spokesman said.

It also needs approval from the Environment Ministry, which would consider any objections from nearby municipalities, although local communities have indicated they support the plan.

“It would be a contribution to our town,” said Mayor Petr Pipal of Dubi, the municipality that includes Cinovec.

Other companies are also showing interest in the resource.

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Cinovecka Deponie, a unit of privately-owned Czech investment group RSJ, won permits to extract lithium from tailings left around Cinovec from past tin mining. It did not offer further details when contacted by Reuters.

Albright Stonebridge Group, co-chaired by former U.S. Secretary of State Madeleine Albright, made enquiries to the regional authorities about possible lithium extraction, Czech media reported. The group did not respond to Reuters queries.

One challenge for miners is that ore around Cinovec contains relatively small amounts of lithium. Jaromir Stary, an expert at the Czech Geological Survey, said it contains four times less lithium in its ore than at the Greenbushes mine in Australia.

But European Metals is undeterred. Its pre-feasibility study in April estimated costs at $3,483 per tonne of lithium carbonate, a level it said would ensure it could turn a profit.

It said the magnetic-sensitive nature of Cinovec’s ore makes processing cheaper than other types.

Spot battery grade 99.5 percent lithium carbonate in China, where most lithium batteries are manufactured, now trades around 140,000 yuan ($20,575.53) per tonne, after a peak of about 171,000 yuan last year.