Euro Managanese Inc

Ladies and gentlemen, thank you for standing by and welcome to the Euromanganese Q2 2022 investor call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question and answer session. And if you would like to ask a question during the session, you will need to press the star 1 on your telephone keypad. If anyone should require assistance during the conference, please press the star 0. I would now like to turn the conference over to your speaker today, Dr. Matthew James, President and CEO. Please go ahead, sir.

Hello, everyone. Good morning, good afternoon to the second quarterly investor call that we're conducting at Neuromanganese. Last quarter, we walked through the corporate presentation, which can be found on our corporate website. This quarter, we'll touch on some market developments for Manganese and then move through to the achievements of the quarter, and then finally the outlook for the rest of the year. So this is our standard disclaimer. This presentation will be available after the call on our corporate website. So just an overview for the battery materials company. poised to become a leading producer of high-purity manganese. That is our vision for Euromanganese. We are set to be the only provider in Europe of high-purity manganese products for the electric vehicle battery market, which is the fastest-growing European fastest-growing region for that industry. We are well-funded at this point in time, backed by EU institutions. and have sufficient funding for a good runway, which we'll detail later. And we strive to have the best ESG footprint, both environmental, social, and governance. Very important in the mining industry. We see this as the first step in building a multi-asset manganese platform within Euromanganese. So just to refresh on the market, we are centered in the heart of the European Union in the Czech Republic. Europe's global outlook is for 1,400 gigawatt hours of planned battery capacity by 2030. A fundamental importance in that market is high-purity manganese. In the typical 662 chemistry, manganese is about 17% in weight, but it's very competitive in its pricing, being only 1% to 2% of the overall battery cost. What's really exciting for the manganese usage in electric vehicle batteries is that the major cathode and battery providers have a roadmap of introducing high manganese chemistries which will drive cathode cost reduction because the manganese is a lot more competitive in pricing compared to nickel or cobalt, thus accelerating manganese demand not just from the growth of the overall industry but by higher manganese content in each battery itself. For example, compared to a 622, which is 60% nickel, 20% cobalt, 20% manganese, a high manganese chemistry like NCM307 is 30% nickel, 70% manganese. So you can see a significant uplift in the demand for manganese when these high manganese chemistries roll into the market. And certainly, in discussions with these companies, these are now commercially ready. And there is demand pool from the industry because of that lower cathode cost. So that generates a demand curve, which has been put together by CMP of just under a million tons of high purity manganese required for the industry by 2030, a tenfold increase from 2020. Supply is lagging, as in many other battery metals. For manganese, it's not the ore supply which is limited, but it's the high purity refining capacity that is where the investment needs to be made. As I mentioned before, euromanganese will be the only high-purity manganese producer with a primary asset within the EU. And currently, there is no high-purity manganese capacity in the US or Canada. So the project update. We're located in the Czech Republic. We have great. infrastructure on site, and we've been producing 50,000 tons of metal equivalent for 25 years by remediating a historical tailings. So not only are we producing a product which will go into the energy transmission industry, but also remediating a currently polluting site where these tailings sit. That gives us great support from the local communities and from the government, and we're on track for finishing our feasibility study in June this year. A major advance in this quarter was that the demonstration plant modules have completed their coal commissioning in China. That was observed by SGS through that process. to ensure quality of performance. Those modules have then been packed, and they were shipped in two consignments. And both consignments have now left Shanghai and are on their ships on the way to Hamburg, where they'll be then transported from Hamburg to our site at Kuala Lumpur in the Czech Republic, the first consignment arriving in the middle of June. and the second consignment arriving early July. As each consignment arrives, assembly will begin in two completely refurbished buildings on site, which are all ready now to accept each consignment. So therefore, commissioning is expected to be completed in September of this year. and then first products out to customers in Q4 this year. And these are samples which will be tons of samples rather than kilograms of samples which came from the initial pilot plant. Customer negotiations are progressing, and I would say they're progressing well. We have the five MOUs which were moving forward to off-take contracts. as well as additional discussions both at the cathode manufacturers, the battery manufacturers, and even the OEMs themselves, who are looking to secure supply for their raw material needs. We expect to have the first announcements of off-day contracts by the end of September this year, with further contracts towards the end of the year. Another advancement this quarter has been in the land access and also land rezoning. We signed a rental deal with the municipality of Kuala Lumpur for a 40-year deal or until the land is remediated, at which point we hand that land back to the municipality. Those contract terms have been approved by the council, and now we're just entering final documentation on that deal. That is a great arm's length market-based transaction, which we will be using for future land access agreements, of which there are two left and progressing well. Land rezoning to a mining is also in progress. So the other close community to us, the municipality of ,, approves rezoning of 85% of their land, which covers the tailings. The other rezoning is with the municipality of ,, and that is ongoing and expected to be completed by the end of the year. So those just indicate, as well, the fantastic community support, which is a result of ongoing engagement over the last few years by the Czech team. Just recently, we welcomed Hannah Schwartz to our board. Obviously, this increases the diversity of the board. which is a great step for the company. But Hannah brings significant experience to the board from the procurement of raw materials for the European battery manufacturers. Hannah spent three years at Northvolt, the European battery manufacturer, as director of metals and raw materials, leading a CAFO's raw materials procurement team for nickel, manganese, cobalt, and lithium. And she's moved to WMC Energy, who are also assisting companies in the lithium ion battery supply chains with their raw material needs. So Anna brings a fantastic set of contacts, a knowledge base, and we'll welcome her to the board. I'll just hand over to our CFO, Martina, to talk through our financial highlights and decisions.

Thank you, Matt. Good morning and good afternoon, everyone. I will briefly comment on our cash position and the runway which it gives us. We started the quarter with 31.2 million Canadian dollars in cash. In February 2022, the European Bank for Reconstruction and Development announced made an investment in Euromanganese, with net proceeds being $8.2 million Canadian dollars. EBRD now holds about 4.5% of shares in Euromanganese. The proceeds from EBRD will be used for the completion of the feasibility study, the EIA, for permitting, for the cost of the demonstration plant commissioning and one year of operation, and other operating costs for our check subsidiary. In January 2022, we completed the net smelter royalty buyout from the original owners of the Czech subsidiary. The remaining amount of 3.6 million US dollars was paid half in cash with the equivalent of 2.4 million Canadian dollars and half in shares. We have also spent 0.7 million Canadian dollars on the advancement of the preparatory work at site in the Czech Republic on the buildings, which will host the demonstration plan, and they will be ready upon the demonstration plan's arrival. Our operating expenses, which include the advancement of the feasibility study, the EIA, other internal project costs, and corporate costs were $4.2 million in the quarter. We closed the quarter with $32.1 million in the bank. This balance will allow us to complete the feasibility study, the EIA, pay for the permitting costs. It will also allow us to install commission and run the demonstration plan for one year and will cover the cost of our pilot plans restart in China. We continue to advance land negotiations and some of critical land acquisitions for the commercial plant area and tailings area are also included in our budget for the next 12 months. This $32 million will also cover our corporate costs for the next 12 months. I will now turn it over back to Matt.

Thank you, Martina. So looking forward through the rest of this year we see some very key catalysts for the company. Martina mentioned that we're restarting our pilot plant in China because there's demand for samples from new customers to progress their qualification. We also talked about the fact that the demonstration plant has been shipped. And we talked about the land access and rezoning, which we will continue to advance through the rest of this year. The completion of the feasibility study will be completed by the end of June this year and also the life cycle assessment which is important for the automotive industry in terms of understanding the global warming potential of each supplier to their target of net zeroes that they have will be published in the second quarter this year as well. That was completed by Milvaro, a well-respected independent body that the automotive industry use. We are close to also appointing a project finance advisor for the debt and equity portion of the project capital required for the project. They will also help us in ensuring that contracts, off-take contracts and EPCM contracts, are suitably structured to underpin bank financing. Once the demonstration plant arrives, it will be installed and commissioned, and that's in Q3, with products going out to customers in Q4. Our final EIA assessment will be completed in September. This follows a preliminary EIA, which was completed in 2020, and we're anticipating a six-month approval timeline, which was the same as the initial PIA. Once the feasibility study is complete, the engineering team will turn to the preparation of tender documentations for an EPC tender process. so we can appoint the EPT contractor towards the end of this year or early next year. We've also commissioned our inaugural sustainability report, which is targeted for production for the end of the year, and again, a key document for our discussions with customers and financiers, because ESG reporting and target setting is key for us, and we think that We have a very good ESG story, and we'll be able to access favorable terms from ESG debt and equity providers. I've spoken about offtake agreements progressing well, first ones before the end of Q3, and aiming for 60% of our product under offtake contracts by the end of the year. So that concludes our quarterly call. And I'd now like to open it up to any questions that any people may have.

Thank you. At this time, I would like to remind everyone in order to ask a question, press star 1 on your telephone keypad. Again, that is star 1 to ask a question. I'm showing no question at this time. Dr. James, please continue.

Okay. Well, if there are no questions, thank you very much for your attention. As I mentioned before, this presentation will be available on our corporate website shortly after this call, as will a recording of the call as well. So I wish you all a good evening and safe travels. Okay. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.