Here’s why the Lithium Australia (ASX:LIT) share price is up 6% in morning trade

Shares in Lithium Australia NL (ASX: LIT) are on the run today. This comes after the company announced that it will be reducing its exposure to operating in the European lithium market.

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The Lithium Australia NL (ASX: LIT) share price is on the run today. This comes after the company announced that it will be reducing its exposure to operating in the European lithium market.

During early-morning trade, the Lithium Australia share price is up 6% to 10.5 cents.

Review of European operations

According to this morning’s release, Lithium Australia has reviewed its exploration activities in Germany.

Since 2017, the company has had its eyes on developing the historic mining areas in the Erzgebirge (Ore Mountains) in Saxony. In that time, Lithium Australia occupied three main areas to take advantage of the growing demand for lithium. These were the Hegelshöhe, Eichight, and Sadisdorf projects – all located along the eastern border of Germany.

However, the company revealed COVID-19 restrictions has created extremely difficult working conditions within the projects. Coupled with the huge financial commitments needed to run its activities, Lithium Australia decided to withdraw its German operations.

Its Sadisdorf exploration permit is at the end of its full-term, and the company will not seek to renew the licence. In addition, its Eichight project has been abandoned, and Hegelshöhe awaits an outcome on its future.

What did management say?

Mr Adrian Griffin, managing director of Lithium Australia, reiterated the company’s strategy, saying:

Rationalising the Company’s exposure to direct exploration expenditure in Europe is in line with our corporate policy, which has seen a marked reduction in our global exploration footprint and the farm-out of many assets. Our preference is to maintain leverage to battery materials in Europe by applying our proprietary technologies, including lithium extraction, cathode powder production and battery recycling, to emerging opportunities.

How has the Lithium Australia share price performed?

The Lithium Australia share price spiked higher last week, gaining more than 30% off the back of positive investor sentiment.

Without the recent surge, the company’s shares would have remained relatively flat over a 12-month snapshot.

The Lithium Australia share price dropped to a 52-week low of 3.2 cents in March, and reached a multi-year high of 10.5 cents last Friday.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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