Euro Managanese Inc

Thank you for those that have joined us today so far.

We're just going to give it about a minute before we get started. Thank you.

Good morning, good afternoon, and thank you for those that have joined us. We're just going to give it about half a minute, and then we'll get officially started. Thank you.

Okay, good morning, good afternoon. Hello, everyone, and thank you for joining us for Euro. Manganese's quarterly and year end results highlights call today. Before we begin today's session, I'd just like to go over some small housekeeping items. This is a webinar format, which means attendees are all in listen and view only mode with no ability to unmute or start your cameras. You will, however, be able to ask questions later in the portion during the Q&A section of the call. You can use the Q&A icon on your Zoom toolbar to type your questions, and you will also be able to raise your hand to do an interactive audio question if you prefer to do that. With all of that said, I would now like to start the session by turning things over to Matthew James. Matthew, the floor is yours.

Thank you. Good morning, good afternoon and good evening to everyone dialing in today. Thank you for joining us to review our fourth quarter and year end highlights so close to the holidays. The slides for today's call can be downloaded from our website.

Before we begin,

I must remind you that this presentation involves forward-looking statements. Please refer to our cautionary statement here as well as the risk factors set out in our annual information form. Our news release yesterday highlights our fourth quarter and year-end financial position. This should be read in conjunction discussion and analysis and financial statements, both of which are available on our website, CDAR and the ASX. Joining me today on the call are Martina Pajarova, Chief Financial Officer, and Louise Burgess, Senior Director, Investor Relations and Corporate Communications. I'll pass over to Martina in a moment to go through our financial highlights for the quarter and the company's financial position. Then I'll run through our performance in Q4 and for the year, looking at key catalysts for 2023 and wrap up with a question and answer session. Over to you, Martina. Martina.

Thank you, Matt. I will briefly comment on our cash position and the intended use of these funds in the coming 12 months. Please note that all figures are in Canadian dollars. We started the quarter with $28 million in cash. $2.3 million was spent on operating expenditures and completion of the feasibility study. The operating expenditures also covered advancement of the environmental and social impact assessment, corporate office costs, as well as the costs of the Czech office. 1.8 million was spent on the completion of improvements to the buildings which now host the demonstration plant and on the transport and setup of the demonstration plant equipment. The demonstration plant is now installed and commissioning has started. And we also spent 2.3 million on the third or fourth option payments for EP Hvalatice, a company which owns the land for the project's proposed commercial plant. We closed the quarter with 21.6 million in the bank. Our cash position will allow us to complete the final environmental and social impact assessment, which will be filed with the Czech Ministry of Environment shortly. The funds we currently have are also expected to cover our other permitting costs for the project, as well as commissioning and operation of the demonstration plant for approximately one year. We will also intend to use these funds to complete or advance certain land acquisitions for the commercial plant area, to complete the EPCM tender process, and to cover our corporate and check costs for the next 12 months. I will now turn it over to Matt.

Thanks Martina.

I wanted to share our purpose, vision and values created by the team earlier this year. These set out a clear North Star for who we are as a company, what we're focused on and the values we believe will underpin our success. Our global team is now 40 people And everyone at Euromanganese exhibits a strong passion and belief in our ability to succeed. It is of utmost importance to me to foster this energy going forward as we deliver on our vision of being the leading environmentally responsible producer of high purity manganese globally, guided by our corporate values. Moving on to the highlights of the quarter. This is a quick overview, which I'll speak to each of these in more detail in the coming slides. The key takeaway is we continue to deliver important key milestones as well as growth initiatives and are well positioned to continue that momentum as we head into 2023. We made great strides in advancing the Kvalovica project this quarter and over the year. Having taken delivery of the demonstration plant modules in early September, the team installed these into two fully refurbished buildings adjacent to the intended commercial plant site. We hosted multiple site visits where we were able to show the buildings and plant modules in place to customers, investors and also a board visit. Commissioning of the demonstration plant is now well underway on a module by module basis. We have commissioned the front end, that is the slurry preparation, magnetic separation and filtering modules. which produce a concentrate and tailings. We're now commissioning the leaching and the first step of purification of that concentrate. A video of our demonstration plant flow process can be viewed via the link here or on our website. On-spec samples of both high-purity electrolytic manganese metal, or what we call HPEMM, and high-purity manganese sulfate monohydrate, or HPMSM, are expected in quarter one 2023, with delivery to interested parties occurring thereafter. Six companies from across the EV supply chain have requested samples from the demonstration plant. A further six companies who are currently testing pilot plant samples are also expected to request demonstration plant samples after that. We filed the positive feasibility study at the end of September on CDAR and on the ASX. As a quick reminder, that outlined a robust post-tax net present value of US$1.3 billion using an 8% discount rate and IRR of 22% with a four-year payback period. Following release of the feasibility study, we began preparing an engineering, procurement and construction management tender package to solicit bids from firms interested in developing the commercial processing plant at Kvalovica in the Czech Republic. Bids have now been received from five Tier 1 EPCM firms and I'm very happy We're looking to appoint a firm who has experience in building similar types of chemical plants in Europe. Selection of the EPCM contractor will allow us to advance basic engineering design and commence procurement of long lead process equipment. On the permitting front, we're targeting to file our final environmental and social impact assessment by year end with the Czech Ministry of Environment. That could enable final environmental permitting for the project in mid 2023.

A key area of focus for us this quarter

purity manganese products in September and are now driving towards term sheets and offtake contracts. We have made a data room available and have hosted site visits for interested parties. Multiple indicative bids have now been received in addition to the five MOUs currently in place and we continue to hold active discussions and negotiations with parties across the EV supply chain in Asia, Europe and North America. Also, part of our off day discussions is exploring additional financial support for the project itself. There has been an increasing trend of backward integration across the battery supply chain with automotive OEMs investing in resource their raw materials needed for EV vehicles. For example, we have seen this with GM investing into Pacific Nickel in Australia, Stellantis' investment in Vulcan Energy in Germany, and Ford's loan to Liontown in the US. That's a good segue into an overview of our project financing strategy. We appointed Stiefel earlier this year On current pricing forecasts, their model supports a 65% to 70% debt gearing, which, based on initial feedback, could be largely supported by European institutions. Both the European Bank of Reconstruction and Development, who are currently our second largest shareholder, and the European Investment Bank have expressed interest in being significant debt providers for the project. That should benefit us as it will be lower cost debt compared to commercial banks, ESG funds and export credit agencies from which there has been also positive interest. That will leave the project with a project finance equity portion of approximately 35%, 30 to 35%. investment with an OEM and or industry strategic at the project level, just as we've discussed above. And basing that on the project's net asset value, which will be a discount to the net present value of the project as we discussed previously. This would then be followed by by a private placement to interested parties that were already in discussions with, and a public offering, potentially at a re-rated stock price, making the project finance equity raise more achievable and less dilutive for current shareholders. As part of our commitment to environmental excellence and transparency, We have completed two lifecycle assessments this quarter. The first LCA measured the environmental impacts of our high purity manganese products. Results showed a net positive benefit to soil and freshwater quality as a result of the tailings remediation. The second lifecycle assessment shown here compared the carbon footprint of a high purity manganese products with those produced by the current China-based incumbent industry. Results indicated our products have a carbon footprint approximately one-third of the incumbent industry. Analysis of the carbon footprint of each of the ternary battery metals shows that our high-purity manganese metal has the lowest carbon footprint. As automotive OEMs increasingly looking at their supply chain to ensure their raw materials are low carbon and ESG compliant. We are very well positioned on this front to supply the market with responsibly produced low carbon manganese projects.

Shifting over

we announced a potential investment opportunity in Quebec, Canada in November. In response to conversations with parties across the EV supply chain, we are exploring the development of a dissolution plan to produce high-purity manganese sulfate for the North American market. And this would give us first-mover advantage in North America. North American demand the high purity manganese is expected to reach approximately 200,000 tons by 2031, when there are no current processing facilities in North America. As you can see from the map here, Quebec is strategically located for the North American plants currently under development. So Quebec is shown in the green section just above the US. These plants are seeking a localised supply to comply with the recent US Inflation Reduction Act regulations. So why Benconcourt in Quebec? Well, within the port of Benconcourt, the industrial park Both GMPOSCO and BASF have announced plants with a third plant associated with another OEM to be announced shortly. This will allow high purity manganese sulfate to be delivered as a solution, which we term HPMSS, high purity manganese sulfate solution to these plants directly from our dissolution plant. as well as working capital for both parties. Site due diligence is underway on a proposed 15-acre parcel within the Paulder Bank and Core. The company has now signed an option agreement allowing it to purchase the site subject to the outcome of due diligence and other conditions. The option agreement is valid for a 21-month period. And currently we announced a scoping study is underway to evaluate the development of by purely electrolytic manganese metal dissolution plant to produce the HPMSS as well as HPMSM powder. So both the solution, but we will also have some crystallization capacity to service other plants outside of Baker core. The study will leverage the extensive process development and engineering work already completed in the Qualivita project. The growth opportunities in the North American market look compelling and we shall provide updates on our growth plans as they evolve. A quick snapshot of our performance against 2022 catalysts. I'm not going to go through these in detail, but the key takeaway is we've delivered against the majority of our goals and those outstanding are progressing well. All in all, I'm very pleased with the tenacity of the team in achieving significant milestones during the year.

So what's next?

focus on appointing an EPCM contractor to commence the front end engineering design for the commercial plant. We'll be looking to get on spec samples from the demonstration plant in the first quarter, followed by sending samples out to customers thereafter. We are working diligently to advise the two remaining land access agreements. We are also preparing the land planning permit to have it ready to submit once we receive approval of our environmental social impact assessment. In the early new year, we'll be looking to appoint our project finance equity advisor and we'll be driving I look forward to updating you on our North American growth plans in Q1 as well. So that concludes our presentation. I'm extremely proud of the ongoing commitment of our team in advancing our flagship QualiVisa project. I look forward to continued delivery of key catalysts a leading and environmentally responsible producer of high purity manganese. Thank you. I'll now open it up to questions.

Thank you, Matthew. If you do have a question, you can use the Q&A icon located on your Zoom toolbar to type your question. Additionally, if you would like to actually speak to us and ask your question, please use the raise hand icon also located on your Zoom toolbar, and we will call your name and allow you to unmute. And if you happen to be dialing in on a phone only connection today, you can use the star nine command to raise your hand and then star six to unmute and toggle that mute capability.

David, we'll just give it one more minute.

Okay, we're starting to get a couple here. I can see. So give me just one more minute and we'll start to get through those. Okay, I will start here. The first question that's come in, I will read it out and then pass it over to Matt and Martina. Have some or all of the indicative bids received been under price terms that would meet minimum cost and debt service thresholds, or are they still subject to negotiation?

Thank you, I'll take that. So the indicative bids that we received, multiple indicative bids, were in the response to our formal tender process. that indicative bids volumes and pricing structures have been submitted and in terms of the actual pricing itself that is still being negotiated but obviously our position is to have a low price in those

But they are still being discussed and under negotiation. Thank you, Matt.

One other here. Are you expecting to do a share consolidation in H1 2023?

Yeah, we have not discussed this until we will announce if anything like that happens in due course, but that's not the plan.

All right, a couple of questions in one here, so I think I'll try and separate them out for you. With regards to offtakes, it appears the few Western world high purity manganese prospects are could be higher on the cost curve than Chinese production. Thus, with commercial discussions, how would you qualify the dialogue on pricing? I don't know if there's any insight there, Matt, you'd be happy to provide.

Sure. I mean, obviously, the value proposition of our project in Europe is very different than to that of a Chinese production on a number of fronts. Purity is one, product purity, meeting Western standards. ESG compliance and ESG global warming footprint, which is one third of the Chinese production. And obviously local security of supply and transparency is very important to the OEMs. And then finally, for the North American growth strategy, being compliant with the IRA with production in North America. So we are not competing with Chinese product and therefore the pricing point, which we have tested for other product that's non-Chinese in the in the European market, is it a very different pricing point than it is compared to what you will see on Asia Metal or some of the other indexes which report Ex Works China product.

And the second part of that same question is high purity manganese has been relatively ignored by the investment community. and has received a fraction of the attention of other battery metals, lithium, nickel, et cetera. Yet its supply and demand appears quite compelling and its usage in chemistries is increasing. What catalysts do you expect to emerge to bring it to the forefront of investors and the investment community's mind?

Yeah, it's a great question. Thank you. I think when I joined the company, nearly a year ago, a year ago tomorrow in fact, when I went to conferences, the first benchmark conferences I went to, everyone was talking about lithium and nickel and cobalt and no one was talking about manganese. I've recently been to two conferences in the US, the benchmark conference in LA in mid-November and the AABC conference early December and both of those there's a marked change in visibility of high purity manganese from both the customer base the you know the analysis the analysts from the different you know, Benchmark or Rowmotion, et cetera. And there's obviously investment community at both of those conferences. The catalyst that you mentioned is one of them. The number of announcements around the increasing usage in high manganese chemistries, which are required to drive down the cost of the cathode, to make the battery more affordable is particularly, you know, in the, in the low end cars, entry level cars, the battery can be one third of the cost of the car. So driving down that cost of battery is really important. So I think we'll see a continued spotlight starting to shine on manganese. You know, we are, in a number of ways, sort of one to two years behind where lithium was or nickel was a couple of years ago, you know, where there wasn't transparent pricing, the lithium price hadn't run up to where it is today. But as, as, more and more news flow comes out about the use of manganese. You know, I'm already having conversations with the investment community who are now focusing on manganese. I recently spent two weeks in Australia touring Sydney, Melbourne, Perth, where the market is, you know, well advanced in its focus on transition metals. And it was very clear, that manganese is now on the mind of that investment community down there.

And I'm sure that will spread to Europe and North America very quickly.

A couple more questions that have just come in here.

One here is, could we provide a little bit more color on our partnership with NanoOne? And is there any potential for kind of increased partnership with them in the near future?

Yes, thank you for the question. We're very pleased with the partnership with Nano One and the results that have been achieved to date. So Nano One have qualified our metal in that process and produced a cathode material. that meets commercial requirements. That was on a relatively small scale sample. So we are looking at what we call phase two of our partnership with Nano One. As they look to build out their capabilities, particularly around the Jonathan Matthey catalog, cathode plant, which they purchased through funded by the investment by Rio Tinto in 2001. They will be looking to expand their production capacity testing to a larger scale in that facility. And we will be looking to supply metal from our demonstration plant, which is again that much larger scale. to continue that partnership. And, you know, we know that they have a number of OEMs very interested in their process. And, you know, they've announced the partnership with BASF. So this is a very interesting project to remove the need for disposal of sodium sulfate by the PCAMP manufacturers. So yeah, we're continuing with that partnership. And we do receive Canadian government funding for our R&D work towards that project as well.

Thank you, Matt.

This might be one for Martina here. What is the run rate for the current funds that Euromangadies has? And does Euromangadies have enough to fund its 2023 objectives.

So as I mentioned earlier, we do have enough funds to advance the project to complete the commissioning of the demonstration plant and to run it for one year. Our funds also cover some critical land acquisitions. and the payments for land that are under option. We also have enough to support the corporate office and the local office and to complete the EPCM tender process. Any significant work on the front-end engineering and design process or longing items that will need to be funded from additional financing, be it through the strategic investor, as Matt mentioned, or other methods. But for now, most of our 2023 plans are covered by the cash balance that we have.

Thank you, Martina.

And it looks like we've got kind of one final question here on pricing. So kind of a couple here in one. The question is, what is the premium for Euromangini's product versus the China price on average? And are we seeing offtakers willing to pay that premium?

in order to have a western supply okay just to just to break this down so we are aware through some of our consultants of pricing of non-chinese material higher than the Chinese Ex Works price. The Chinese Ex Works price is really not a comparison for European product. As I mentioned before, it has very different characteristics and value propositions. So yes, the Western buyers are buying you have high purity manganese today at a significantly higher prices than you'll see on the Chinese indexes. That price today is around $2,400 a tonne. And when you look at CPM's forecast prices, which we've used in our feasibility study, In 2023, their forecast is very similar to that level. That forecast increases due to the supply deficit that's forecast in the market. And those forecasts are available and are feasibly in the study announcement. So the Western price is significantly higher than the Chinese. We expect both prices to increase based on the supply deficit that's forecast by the time we're in production in 2027.

Thank you so much, Matt and Martina. I think that covers all of the question and answers that have come in through the chat function. I will pass it back over to you, David, in case there's any questions that have come in through the phone that I can't see.

There are no further questions, Louise. Thank you.

Okay, maybe I could just say some final words. I think this is a very exciting time for the battery raw materials sector, particularly for manganese. as we've discussed with the move to the high manganese chemistries really starting to get a pace, and particularly with the introduction of manganese into the LFP chemistries as well. And euromanganese is very well positioned to take advantage of the localization of supply to the EV market with a high purity manganese for lithium-ion batteries. So I'll just finish off with happy holidays to all. And I look forward to talking to you and giving you an update in our next quarterly call in the new year. Thank you, everyone.

Thank you, Matthew. Thank you, Martina. Thank you, Louise. That concludes today's conference.