Euro Manganese raising money for Chvaletice manganese project in Czech Republic
In order to accelerate work at its Chvaletice manganese project, in the Czech Republic, Euro Manganese will raise C$29-million in a private placement. The share offer will be done in two tranches, with the first consisting of more than 41.6-million CDIs to raise an initial C$24.2-million, while the second tranche would consist of more than 8.3-million CDIs, to raise a further C$4.8-million. The second tranche placement will be subject to shareholder approval.
The share placement is being anchored by a strategic investor and an environmental, social and corporate governance-focused fund, and received strong support from several existing institutional shareholders, Euro Manganese said. Proceeds from the share placement will be used to advance the Chvaletice manganese project, allowing for the completion of all site and technical work required for a final investment decision by 2022.
“We are very pleased to see such strong and high quality investor interest in this equity offering. We now have the funds required to install, commission and operate our demonstration plant and to finalise our definitive feasibility study and final environmental impact assessment during the next 12 months,” said Euro Manganese president and CEO Marco Romero.
“The demand for high purity manganese products continues to grow and the latest market developments have further improved our prospects. Volkswagen Auto Group recently announced plans to use a high proportion of manganese in their batteries that will be used in the largest segment of its future electric vehicle production.
“In addition, Euro Manganese has secured support from EU-backed EIT InnoEnergy, which is intended to help us accelerate the Chvaletice manange project and to secure strategic financing and customer offtake agreements. Euro Manganese is clearly in the right place at the right time,” said Romero.
A preliminary economic assessment of the Chvaletice project estimated that it would require a capital investment of some $404-million, to produce some 1.19-million tonnes of manganese over a 25-year project life.
Euro Manganese gets support from European EIT
EIT InnoEnergy a Knowledge and Innovation Community supported by the European Institute of Innovation and Technology will marshal its broad network and resources to accelerate the Chvaletice Manganese Project’s successful integration into the European Union’s battery supply chain. The group has agreed to help Euro Manganese in securing financing of up to €362 million for the commercial development of the Chvaletice Manganese Project. Potential funding sources include Europe-wide and regional grant programs as well as European project finance and economic development banks.
A recent example of the support InnoEnergy can provide is where they led the Battchain consortium submission for €1.2b of Coronavirus Recovery Funds – Infinity Lithium is in line for a €256M euro capital injection if the InnoEnergy led bid is successful. The Chvaletice Manganese Project stands to become the only primary producer of battery-grade manganese products with the potential to provide up to 50% of projected 2025 European demand for these products and 28% of its anticipated 2030 requirements. At a time when ESG (environmental, social, governance) issues are becoming increasingly important, the project also brings local environmental and social benefits. As tailings from the decommissioned mine are recycled to produce battery-grade manganese, a longstanding source of water pollution will be eliminated and high-quality jobs will be created for local communities.
Feasibility study, demonstration plant and offtake agreements pending
To expedite CMP and realise the benefits it brings to Europe, EIT InnoEnergy will provide initial funding of €250,000 in the company that will go towards ongoing work on a detailed feasibility study and demonstration plant, both targeted for completion by the end of 2021. These will be market-moving developments for Euro Manganese given that they will reaffirm and perhaps represent an improvement on previous expectations regarding proof of concept and commercial viability, as well as being a valuable point of reference for potential offtake partners. It is worth noting that EIT InnoEnergy will further assist Euro Manganese in securing offtake agreements with consumers of high-purity manganese products, including European electric vehicle, battery and cathode manufacturers. In particular, the feasibility study paves the way for project development, opening the door for key milestones such as financing where support from EIT will very much come to the forefront.
Euro Manganese to develop a high-purity manganese production facility in Czech Republic
Euro Manganese is looking to develop a high-purity manganese production facility to reprocess tailings material from historic mining operations at Chvaletice that ran from the early 1900s through to 1975. As Euro Manganese advances feasibility studies at its wholly owned Chvaletice manganese project about 90 km east of Prague in the Czech Republic, it has also been lining up potential customers for planned output from its demonstration plant, which is projected to come online in late 2020.
So far, the company has queued up five prospective customers for about 55% of the planned demonstration plant capacity, and management hopes these early-stage customers will ultimately become long-term buyers from full-scale production down the road.
Since first looking at the project in 2015, Euro Manganese has undertaken studies on the size of the resource and its extraction potential (running a pilot-scale test operation). In early 2019, the company announced the results of a preliminary economic assessment (PEA) for the project that showed an after-tax net present value of US$593 million using a 10% discount rate.
The PEA models a project operating life of 25 years producing 1.2 million tonnes of high-purity electrolytic manganese metal (HPEMM), of which two-thirds is expected to be converted into high-purity manganese sulphate monohydrate (HPMSM) powder.
The study forecast US$404 million in pre-production capital, US$24.8 million in sustaining capital, and US$31 million in working capital, with a post-tax internal rate of return of 22.6% and a 4.9-year payback. The project’s economics were based on an average HPEMM (containing 99.9% manganese) price of US$4,617 per tonne and HPMSM (containing 32% manganese) price of US$2,666 per tonne over the life of the operation.
“The pilot plant tests were a resounding success,” Marco Romero, Euro Manganese’s president and CEO, said in an interview. “We produced high-purity manganese products of a quality that has not been seen before by the market — the highest-purity products in the world right now.”
The project hosts measured and indicated resources of 27 million tonnes grading 7.3% total manganese (5.9% soluble manganese), with 98% of the resource tonnes in the measured category.
The resource is contained in three above-ground tailings cells from past operations, with indications that the manganese is homogeneously distributed throughout the tails. About 80% of the manganese occurs in carbonate form as rhodochrosite and kutnohorite, which is beneficial as it is readily leachable in the extraction process and requires no calcination, unlike manganese oxide ore.
“The vast majority of our target market is very much the lithium-ion battery industry, and there are also other customers that need very high-purity inputs for specialty steel products, such as hydrogen storage tanks, and for hybrid vehicle anodes, and also for ferrite permanent magnets used in electric vehicles,” Romero said.
Often referred to as the forgotten battery metal, the outlook for high-quality manganese looks robust. Benchmark Minerals Intelligence, which specializes in battery material research, recently forecast demand growth for high-purity manganese will jump from 80,000 tonnes in 2020 to 370,000 tonnes in 2025, a more than 360% increase. Benchmark Minerals’ growth projections are just for the EV/cathode battery sector and do not incorporate demand from other sectors such as motor fabrication, anodes and specialty steels, aerospace aluminum-magnesium alloys, or beverage can stock.
Although it can be a significant component in lithium-ion batteries, manganese itself does not make up a big cost constituent. “Depending on the cathode chemistry it can be anywhere between 10% to a third of the cathode mass, but because it is a lower value product it can be as low as 1-2% of the cost of the battery,” Romero explained.
Given its location in the Czech Republic, a member of the European Union, the company has a natural target market throughout the continent. “We stand to become the only primary producer of high-purity manganese products in Europe,” Romero said. “There is no other deposit [in Europe] even remotely close to this scale and quality.”
Euro Manganese says it is working on setting up a supply chain qualification process with several customers.
“We’re currently in the middle of a feasibility study, which we expect to complete by year end, and we’re months away from filing our project notification that is the start of the environmental assessment process for the full-stage project,” he said.
Approximately 95% of global high-purity manganese product is produced in China, where several projects have been built recently or are under construction.
Euro Manganese has tapped into that Chinese expertise in the sector and established strategic relationships with three firms.
CINF, the engineering arm of Aluminum Corp. of China (Chinalco), undertook a prefeasibility study on Chvaletice that ultimately turned into the company’s PEA.
The company is also partnered with Changsha Research Institute for Mining and Metallurgy (CRIMM), a research arm of China Minmetals, on all its lab and test work, including pilot plant construction. CRIMM has also been awarded the contract for the building, delivery and commissioning of the Chvaletice demonstration plant for a fixed price of US$2.5 million.
Euro Manganese recently appointed BGRIMM Technology Group (BGRIMM), a division of Beijing General Research Institute of Mining and Metallurgy, as lead process plant engineer for the Chvaletice feasibility study, which commenced in October 2019.
Data from the BGRIMM-led feasibility study has started to trickle out with recently reported magnetic separation test results of about 85% total manganese recovery and a 15% total manganese concentrate grade, supporting the proposed process flow sheet for the operation. Additionally, deep purification confirmation tests also verified previous test findings, with the successful removal of target product impurities.
Capital and one-year operating costs needed to complete Euro Manganese’s demonstration plant are expected to reach about US$5 million. The company’s latest financials indicate a current funding gap, showing just over $2 million in the treasury.
Romero reports that the company is evaluating several near-term funding options. In addition, the company says it anticipates entering into offtake agreement negotiations with its high-purity manganese customers to support project financing for the commercial development of the project.
Euro Manganese is covered by two mining analysts. Anoop Prihar, an analyst at Stifel Nicolaus Canada (previously GMP Securities), has a speculative buy rating on the company with a target price of $1.00 per share, while Canaccord Genuity mining analyst Larry Hill has a target price of A$1.10 on the stock.
At press time in Toronto, Euro Manganese traded at 12¢ per share, near the lower range of its 9.5¢ to 28¢ one-year trading range, giving the company a market capitalization of $21 million.