As Euro Manganese (TSXV: EMN) 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.
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.
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 $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 $404 million in pre-production capital, $24.8 million in sustaining capital, and $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 $4,617 per tonne and HPMSM (containing 32% manganese) price of $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 $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 $5 million.
The company’s latest financials indicate a current funding gap, showing just over C$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 C$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 C$21 million.