VANCOUVER, British Columbia, July 27, 2022 (GLOBE NEWSWIRE) -- Euro Manganese Inc. (TSX-V and ASX: EMN; OTCQX: EUMNF; Frankfurt: E06) ("
Euro Manganese
", the "
Company
" or "
EMN
") is pleased to release highlights of its completed Feasibility Study ("
FS
" or "
Study
") for the Company’s flagship Chvaletice Manganese Project ("
CMP
" or "
Project
") located in the Czech Republic.
All financial figures are in US dollars unless otherwise stated.
HIGHLIGHTS
-
Robust base case project economics
- After-tax Net Present Value (" NPV ") of US$1.34 billion and pre-tax NPV of US$1.75 billion, using an 8% real discount rate and risk-adjusted base case price forecast.
- Ungeared after-tax Internal Rate of Return (" IRR ") of 21.9% with a 4.1-year payback period; and pre-tax IRR of 24.9% with a 3.6-year payback period.
- Initial capital (" Capex ") of US$757.3 million, including contingencies of US$103.2 million (US$78.4 million on direct costs and US$24.8 million of growth capital).
- Sustaining capital (" Sustaining Capex ") of US$117.0 million over the 25-year life of project (" LOP ").
- LOP revenues of US$13.9 billion with gross revenues expected to average US$554 million per year over the 25-year project life.
- Project earnings before interest, taxes, depreciation and amortization (" EBITDA ") and annual average EBITDA forecasted to be US$8.1 billion and US$326 million respectively, averaging 58.8% EBITDA over the LOP.
-
Project of strategic importance to Europe with exceptional environmental and social benefits and production of in-demand products
- Uniquely positioned to provide a secure, traceable, and responsibly produced supply of high-purity manganese products to the European electric vehicle (" EV ") market.
- CMP is the only sizable, Proven and Probable Reserve of manganese in the European Union.
- Located in the Czech Republic, a sophisticated, stable, and business-friendly jurisdiction that is highly supportive of new, green investments.
- Excellent transportation, energy and community infrastructure, and land for the processing plant and related infrastructure.
- Unique green project credentials with a low carbon footprint and net positive environmental benefits resulting from recycling and remediation of the Chvaletice historic tailings.
- Significant support from local communities, municipalities, the Czech government, and the European Union.
-
Wide-ranging benefits for local communities and the Czech Republic in the form of jobs and revenues:
- The Project expects to employ ~400 people during operation.
- An estimated US$1.5 billion in payments are expected to be made to the Czech Republic from corporate taxes and royalties.
-
High Purity Manganese market forecasted to increase significantly over the life of Project
- According to CPM Group LLC (" CPM Group "), a leading, independent commodities market research firm with expertise in high-purity manganese, the market for high-purity manganese sulphate monohydrate (" HPMSM ") and high-purity electrolytic manganese metal (" HPEMM ") is forecast to be radically transformed as a result of the ‘electric vehicle revolution’. Most lithium-ion batteries that power electric vehicles are expected to use manganese (" Mn ") in their cathodes and these manganese-containing battery chemistries are expected to dominate the battery market for the next two decades.
- As a result, CPM Group expects the demand for high purity manganese to increase 13 times between 2021 and 2031 (from 90 kt to 1.1 million tonnes (" t ") of Mn contained) and 50 times between 2021 and 2050 (to 4.5 million tonnes of Mn contained).
- The total Mn market in 2022 is approximately 22 million tonnes, with Mn use currently dominated by the steel industry, however, high purity manganese suitable for the battery market makes up less than 0.5% of the global manganese market.
- The bottleneck in supply of HPMSM and HPEMM is the lack of high-purity refining capacity. Known expansions and new projects are unable to satisfy this demand. CPM Group forecast’s the 2031 deficit to be 475kt Mn equivalent and if battery demand continues to grow as expected and no additional new projects come to the market, the deficit would increase to 1 million tonnes by 2037.
-
European HPMSM and HPEMM base case pricing with further potential upside outlined in sensitivity analysis
- Base case project economics are based on Tetra Tech Canada Inc.’s (" Tetra Tech ") adoption of a risk-adjusted short-term price forecast that follows CPM Group’s forecast for HPMSM and HPEMM to 2031 and then holds prices flat over the remaining LOP, resulting in average prices of $4,019 per tonne of HPMSM containing 32.34% Mn and $10,545/t of HPEMM containing 99.9% Mn.
- CPM Group’s unaltered price forecast was used as the upside case in the sensitivity analysis with average LOP prices of $4,509/t for HPMSM and $12,075/t for HPEMM.
-
Attractive proposition for potential financial partners
- Euro Manganese recently appointed Stifel Nicolaus Europe Limited, a wholly owned subsidiary of Stifel Financial Corp. (NYSE:SF) (" Stifel "), as financial adviser to assist with the structuring and securing of financing for the Project.
- The Company believes the FS confirms that the Project is an attractive proposition for potential financial partners due to its robust project economics, in-demand products, unique environmental credentials, excellent jurisdiction located in the heart of European EV market, and strong support from leading financial European institutions.
-
Conversion rate of ~99% Resources to Reserves supports a 25-year project life
- Tetra Tech used appropriate modifying factors to convert the Mineral Resource to a 27 million tonne Proven and Probable Reserve (98.3% Proven) with a grade averaging 7.41% Mn.
- Study is based on the reprocessing of historic tailings without the requirement of any hard rock mining, crushing or milling.
- FS outlines a 25-year project life producing 1.19 million tonnes of HPEMM, approximately two-thirds of which is expected to be converted into HPMSM on-site.
- Saleable product includes 2.5 million tonnes of HPMSM (32.34% Mn) and 372,300 tonnes of HPEMM (99.9% Mn) over the LOP, averaging 98,600 tonnes of HPMSM and 14,890 tonnes of HPEMM annually, focused principally on Europe's rapidly growing EV battery industry.
- Flexibility to supply either HPMSM or HPEMM, to suit customer preference.
Dr. Matthew James , Euro Manganese’s President and CEO, commented:
“I am extremely pleased with the results of the Feasibility Study, which further validate the financial credibility of the Chvaletice Manganese Project, even in the current inflationary environment and using conservative risk-adjusted pricing for HPMSM and HPEMM. The strength of the Project economics, its green credentials and the forecast demand from the EV industry for our highly specialized products support a wide range of financing alternatives.
Several factors uniquely position Euro Manganese to transform into a leading supplier to the European EV market. The supply security, traceability, sustainable production, and low impurity, high quality nature of Chvaletice’s battery grade manganese products, make our HPEMM and HPMSM increasingly desirable to customers.
I am proud of the team’s accomplishments in delivering this very positive Feasibility Study and confirming the viability of the Project. We remain focused on progressing our key milestones towards making a final investment decision, including securing our financing package for the Project, and have already commenced work alongside our recently appointed project finance adviser, Stifel Nicolaus Europe Limited.”
Mr. John Webster , Chair of the Board of Euro Manganese, commented:
“The global automobile industry has been transformed in recent years with manufacturers focused on the transition to electric vehicles. This focus has not only resulted in an increased demand for battery raw materials, but specifically for those sourced from a sustainable and responsible supply chain. At the same time, manganese has emerged as a key component in the dominant formulations of lithium-ion batteries. This has created an unprecedented opportunity for us.
The Chvaletice Project is a key pillar in ensuring the security of supply for Europe’s EV industry. Our strategic location in the Czech Republic, central to an emerging cluster of electric vehicle plants and a related ecosystem of chemical, cell and battery producers, our 25-year operating life, and our commitment to the responsible production of high-purity manganese products, has attracted the attention of lithium-ion battery, battery precursor and cathode makers from around the world.
The completion of our Feasibility Study is a significant milestone for Euro Manganese and moves us a step closer to bringing the Chvaletice Manganese Project into production.”
FEASIBILITY STUDY SUMMARY AND PROJECT ECONOMICS
The following table summarizes the material assumptions used in and the results of the FS, assuming a targeted start of production in 2027. Plant commissioning is anticipated to commence in 2026.
Table 1: Summary of Chvaletice Feasibility Study (Base Case)
| Metrics | Units | Results | |
| Project Summary | |||
| Type of operation | Tailings reprocessing | ||
| Life of Project (“LOP”) | Years | 25 | |
| Price Assumptions - average LOP (2027-2051) | |||
| High purity manganese sulphate monohydrate (“HPMSM”) | $/tonne | 4,019 | |
| High-purity electrolytic manganese metal (“HPEMM”) | $/tonne | 10,545 | |
| Production | Average Annual | LOP | |
| Total tailings extracted & processed | Dry Kt | 1,066 | 26,644 |
| Total manganese grade | % | 7.41 | 7.41 |
| Contained manganese (Mn) | Kt | 78.9 | 1,973.5 |
| Total HPEMM produced | Kt | 47.8 | 1,194.5 |
| HPEMM further processed into HPMSM | Kt | 32.9 | 822.3 |
| HPEMM sold | kt | 14.9 | 372.2 |
| HPMSM produced / sold | Kt | 98.6 | 2,465.0 |
| Total Mn contained in HPEMM & HPMSM | Kt | 46.8 | 1,171.9 |
| Overall total Mn recovery | % | 59.4 | 59.4 |
| Revenues | Average Annual | LOP | |
| Revenue from HPEMM | $M | 157 | 3,931 |
| Revenue from HPMSM | $M | 397 | 9,931 |
| Total revenue | $M | 554 | 13,862 |
| Operating Costs (per tonne of dry plant feed) | |||
| Tailings extraction | $/t | 2.44 | |
| Magnetic separation, HPEMM & HPMSM processing | $/t | 143.18 | |
| Tailings stacking/storage, site services, land rentals, and water treatment | $/t | 27.11 | |
| General & Administrative | $/t | 12.79 | |
| Contingency | $/t | 9.28 | |
| Site operating costs | $/t | 194.79 | |
| Freight and insurance, and selling costs | $/t | 15.22 | |
| Czech government royalty ( 1 ) | $/t | 4.53 | |
| Total operating costs | $/t | 214.54 | |
| Capital Costs and Working Capital | |||
| Initial capital | $M | 757.35 | |
| Sustaining capital over Life of Project | $M | 117.0 | |
| Initial working capital ( 2 ) | $M | 78.7 | |
| Project Economics | Pre-Tax | After Tax | |
| NPV (8% real discount rate) | $M | 1,750 | 1,342 |
| IRR | % | 24.9 | 21.9 |
| Payback period, from start of processing | Years | 3.6 | 4.1 |
| Cumulative cash flow, undiscounted | $M | 7,309 | 5,912 |
Notes:
- Czech government royalty is 2,308 Czech Koruna (CZK) per tonne of Mn produced, translated to USD at a projected CZK to USD exchange rate of 22.43.
- Initial working capital represents the build up of $29.1 million in inventory and $49.6 million in receivables over the course of the first year.
CASH FLOWS
Table 2: Project Revenue, Costs and Cash Flows (Base Case)
| Projected Cash Flows |
Average Annual
($M) |
Life of Project
($M) |
| HPMSM revenue | 397.2 | 9,931.2 |
| HPEMM revenue | 157.2 | 3,930.9 |
| Gross revenues | 554.5 | 13,862.1 |
| Freight and insurance, and selling costs | 16.2 | 405.6 |
| Czech government royalty | 4.8 | 120.6 |
| Net revenues | 533.4 | 13,335.9 |
| Site operating costs | 207.6 | 5,190.1 |
| Capital costs (initial, sustaining and demolition less salvage value) | 33.5 | 836.4 |
| Projected cash flow (pre-tax) | 292.4 | 7,309.4 |
| Corporate taxes | 55.9 | 1,397.4 |
| Undiscounted cash flows | 236.5 | 5,912.0 |
The Czech corporate income tax rate is 19%. In addition to the royalty of CZK 2,308 per tonne of unit Mn produced, the Czech Republic has various payroll and other taxes. The Company has modeled the economics of the Project conservatively from a tax perspective, with a full tax burden, based on Czech legislated tax rates.
For a detailed table of cash flows, please see Appendix 2 .
HPMSM and HPEMM PRICING
HPMSM and HPEMM pricing used in this FS is based on price projection assumptions developed by CPM Group, a leading, independent commodities market research firm, with expertise in high-purity manganese.
CPM Group’s price forecast for HPMSM and HPEMM was driven by supply and demand dynamics. Factors taken into consideration of CPM Group’s analysis include:
- A significant increase in forecasted demand for HPMSM and HPEMM markets, resulting from an estimated 30-fold increase in the use of manganese in lithium-ion batteries for electric vehicles between 2021 and 2036;
- A project supply pipeline with six non-Chinese HPMSM projects potentially coming on stream by 2030, plus an assumption of supply coming from recycling batteries and an increase in Chinese supply; and
-
A deficit in 2031 of 475kt Mn equivalent. If battery demand continues to grow as expected and no additional projects come to the market, the deficit would increase to 1 million tonnes by 2037.
CPM Group calculated a European HPMSM price based on the Chinese HPMSM price plus the cost of transportation to Europe (sea freight and land transport), import duties (currently suspended), and premiums for purity, traceability and ESG credentials. CPM Group’s estimate puts these European premiums at 15-25% of the Chinese HPMSM price. It should be noted that published HPMSM prices cover many different purities of the product traded, much of which is unable to meet European EV battery producers’ specifications.
Current HPEMM pricing is based on EMM being predominantly a metallurgical market metal, however HPEMM is expected to become predominantly a battery market metal in the near future as this metal can be converted into HPMSM. CPM Group estimates that the demand for HPEMM will significantly increase, leading to competition for supply between the metallurgical industry and a significantly larger battery industry with a supply deficit. Therefore, future HPEMM pricing is forecast to be derived from the HPMSM price as set by the EV battery industry rather than set by the metallurgical market.
This price differential between battery market grade HPEMM and HPMSM is estimated to equate to the cost of conversion of metal into sulphate, plus the profit of the converter, plus an element of amortization of the converter’s capital expenditure incurred when building the dissolution plant, conservatively estimated to be a total of approximately $2,000/mt of metal. Therefore, this differential is subtracted from the European price of HPMSM, on a metal basis, to provide a European price of HPEMM.
Base Case vs Upside Case Pricing
Tetra Tech adopted a risk-adjusted, short-term forecast for the base case price used in this FS that follows CPM Group’s forecast for HPMSM and HPEMM to 2031 and then holds prices flat over the remaining LOP.
The upside case uses CPM Group’s unaltered forecast, which increases pricing through to 2035, then holds prices flat between 2035 and 2040, recognising that a price will be reached which would stimulate additional supply in a growth market. Based on potential additional supply, CPM Group assume prices begin to fall after 2040, despite a continually growing market.
Table: 3 Base Case vs Upside Case Pricing (1) by Product
| Base Case Pricing | Upside Case Pricing | |||
| Year |
HPMSM
($/t) |
HPEMM
($/t) |
HPMSM
($/t) |
HPEMM
($/t) |
| 2027 | 3,266 | 8,197 | 3,266 | 8,197 |
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