Euro Managanese Inc

Good day, everyone. Welcome to Euromanganese's second quarter 2024 conference call. We still have some people joining, so we'll give it about 30 seconds or so before we get started. Please note this webcast is being recorded and a replay will be available on our website. You can download the slides that we used today from the website as well. And after the presentation, we'll have a question and answer period. If you'd like to ask a question, please use the Q&A function at the bottom of your screen. You can enter a question at any point during the presentation and we'll cover it during the Q&A period. But we also welcome questions post the call, so please feel free to reach out to Matt, Martina, or myself. Before we begin, note that this presentation involves forward-looking statements. Please refer to our cautionary statements here and the risk factors in our annual information form. Our second quarter financial statements and management discussion and analysis for the three and six month periods ending March 31st, 2024 were filed on May 15th, 2024. All of these materials are available on our website, CDAR Plus and the ASX. Over to you, Matt.

Good morning and good afternoon to everyone. Thank you for joining us to review developments during Euromangani's second fiscal quarter. Joining me on the call today is Martina Blahova, Chief Financial Officer. I'll pass over to Martina in a moment to go through financial highlights for the quarter and the company's financial position. Then we'll run through key developments during the quarter and how we are performing against our key 2024 catalysts. We'll wrap up with a question and answer session. Over to you, Martina.

Thank you, Matt. Just a reminder that our fiscal year end is September 30th, so our Q2 references the period January 2024 through March 2024. We also report in Canadian dollars. I will briefly comment on our cash possession at the end of the quarter. We started the quarter with 24.3 million in cash. 0.4 million was spent to advance the commissioning of the demonstration plant, which is nearing completion. 1.3 million was spent on operational expenditures, which included the advancement of Kvalitice permitting and other corporate costs. These expenditures are net of 0.8 million of cash generated in operating activities by EP Chvaletice, a specialty steel fabrication product company acquired at the end of last quarter, as its key asset is the land it owns, which is intended for the project's processing plant. Interest on the convertible loan was 0.3 million. We also made land acquisition and lease payments of 2.2 million. We closed the quarter with 20.1 million in the bank. Our cash balance is expected to provide sufficient funding to complete project permitting, demonstration plant commissioning, and ongoing operations, as well as continuing to make lease and option payments for land parcels required for the project. This cash is also expected to enable us to continue with the initial feed base of the EPCM contract and certain site preparation works, as well as fund general and administration expenses. I will now turn it back to Matt.

Thanks, Martina. Here's an overview of the key highlights during the quarter end to date. The highlights of the second quarter was obtaining approval for the environmental and social impact assessment for the Kvalivica project from the Czech Ministry of Environment. I'll provide more details about this in the following slides. Turning to project updates, our demonstration plant in the Czech Republic successfully produced high-purity manganese sulfate from high-purity electrolytic manganese metal produced in the demonstration plant over the quarter. We also continue to make progress with our off-tech negotiations with potential customers. During and subsequent to the quarter, we saw significant regulatory updates in our key markets, including the final approval of the Critical Raw Materials Act in Europe and the finalisation of tax credit regulations under the 2022 Inflation Reduction Act in the United States. These regulations have significant positive implications for the adoption of electric vehicles and in particular for manganese demand from local sources and therefore we welcome these significant pieces of legislation. Finally, as I outlined during our last call, the Kuala Lumpur Manganese Project has support from the European Investment Bank for debt funding. now listed on the EIB's website under the list of projects to be financed, which we view as a key step towards securing the required debt component of the total project financing required. As I mentioned earlier, in March 2024, we received a positive environmental social impact assessment binding statement from the Czech Ministry of Environment, approving the environmental and social conditions set out in the ESIA. This assessment is the key gating permit from which subsequent more procedural permits can follow, including the land planning permit and the construction permit, as well as progressing to the final determination of the mining lease for the project. I'm particularly pleased to note the excellent stakeholder engagement on the part of our check team resulted in no comments or opposition from local stakeholders during the ESIA commentary period. During the quarter, we produced high purity manganese sulfate from our high purity manganese metal produced by the demonstration plant. Our internal analysis indicates that the product should meet the demonstration plant target specifications with low levels of impurities. External lab testing is currently underway to confirm these results and we expect to receive the results within the next few weeks. Operation of the demonstration plant is a key step in de-risking our project Through one, demonstrating that the process steps produce the correct specification products at the correct yields. Also, the collection of sufficient operational data at a scale that ensures there is confidence in the extrapolation to full scale during engineering. And finally, gaining valuable insight, which are leading to further engineering and operational process improvements, which we can incorporate in our final plant design. In the early part of 2024, we witnessed important regulatory updates across our key markets. In Europe, the Council of the EU announced final approval of the Critical Raw Materials Act in March The Act, coming into force this week, establishes three benchmarks for domestic mining, processing and recycling, all of which we believe the QualiVenture project will help meet. This positions Euromanganese to become the sole European integrated producer of high-purity manganese in the battery value chain. Additionally, earlier this month, the US issued the final regulations for tax credits under the Inflation Reduction Act of 2022. A key point of clarification is that the foreign entity of concern compliance rules cover the whole supply chain. e.g. no critical raw materials may be extracted, processed or recycled by a foreign entity of concern. No graphite has a two and a half year grace period. This has significant positive implications for Western producers of battery metals, in particular high purity manganese. With China controlling over 90% of the high-purity manganese market, manganese can now be thought of as the bottleneck for foreign entity of concern compliant material. Our Kuala Lumpur project is the most advanced Western project under development, and notably one of the very few non-foreign entity of concern projects globally. In addition, Just last week, the Biden administration announced a series of tariff hikes on a wide range of Chinese imports. Under the new policy, US tariffs for certain critical raw materials sourced from China will increase from 0% to 25%, and the tariff on electric vehicles from China will increase from 25% to 100% in 2024. Kuala Lumpur remains the only sizable, proven and probable reserve of manganese in the EU, uniquely positioning Euromanganese to provide a secure, traceable and responsibly produced supply of high purity manganese products to the North American and European EV markets. There has been a marked uptick in proactive discussions with Ofte customers, highly driven by the recent regulatory updates I just mentioned. We are seeing an increase in interest in our high purity manganese, with off-takers reaching out proactively as planned tonnages increase, combined with concern on supply constraints. Additionally, we are actively engaging with organisations at a more senior level. Three new off-takers have entered the funnel and three have progressed down the funnel, leaving 30 parties in the top tier with more than 70,000 tonnes of high-purity manganese sulphate per annum in aggregate under discussion. Many of these new potential customers are yet to provide tonnages, so there is significant upside potential. There are now 16 parties in the middle of the funnel, two parties from the top who have moved down, and two parties directly entering the middle tier, with greater than 100,000 tonnes of high-purity manganese sulphate per annum. At the sharp end of the funnel, we now have 11 parties in advanced stages of negotiations, where one party moved directly from the top tier to the bottom tier, now with a combined interest of over 130,000 tonnes of high-purity manganese sulphate per annum. I would reiterate that these are initial tonnages from off-takers and these potential customers have indicated a need for higher tonnages as the market grows and as manganese-rich chemistries evolve. Euromanganese remains very well positioned to meet the increasing need for high purity manganese in lithium-ion batteries. Overall, as this slide illustrates, euromanganese has a distinct competitive edge over other producers. We have the only manganese resource in the EU and stand to benefit from increasing demands for a local, responsibly produced source of supply, while benefiting from stricter regulations on both sides of the Atlantic. We're the only project at feed stage with an operational demonstration plan to de-risk the project. Furthermore, as the only project to utilise circular tailings reprocessing, with 65% lower CO2 emissions compared to the incumbent producers, Neuromanganese has a clear competitive advantage in sustainability. We made significant progress on several key catalysts during the first part of the year. On a project level, the ESIA approval for the Qualivisa project was a major permitting and project milestone. We also appointed Mr. Tim Kindred as project director of the Qualivisa project in January of this year. Tim is a highly skilled project and operations leader in the mining and metals industry with a proven track record of delivering large-scale billion-dollar projects on time and on budget. He's a valuable addition to our team. Land acquisition and access agreements for the commercial processing site are now 100% complete following the acquisition of EP Kvalovica at the very end of the previous quarter, as Martina mentioned. With respect to land agreements for the tailings area, four of five are complete, with one ongoing. Furthermore, with high-purity manganese metal and soon-to-be verified on-spec high-purity manganese sulfate produced from our demonstration plant, we can now supply bulk samples required by potential off-taker customers for their large-scale tests. On the project financing front, the Qualivisa project has advanced to the formal under-appraisal stage with the European Investment Bank for debt funding. On the list of projects to be financed. Under-appraisal means the project has progressed through the EIB's initial due diligence process. This underscores the EIB's commitment to support sustainable opportunities in the battery supply chain. With the European Bank for Reconstruction and Development already a key shareholder and having also expressed interest in providing debt financing, this advancement is another key step towards securing the required debt component of the total project financing required. Finally, Wood continues to progress with the feed part of the EPCM contract. During the remainder of 2024, we remain focused on advancing our flagship project in Europe. Our key goals include securing additional off-take term sheets and contracts, securing a strategic investor at the project level, progressing the work of the feed phase of the EPCM contract, completing the remaining land access agreement in the tailings area, Advancing the more procedural project permits now that we have received the ESIA approval. Commencing the formal project debt finance process and also progressing the feasibility study for the bank and call dissolution plan subject to financing. To conclude, I would like to express my gratitude for the team's effort this quarter and for the ongoing support of our shareholders, particularly in these tough markets, as well as the support of national and local governments, community members, partners, suppliers and prospective customers. Thank you everyone for listening today. I'll now open it up to questions.

Just a reminder for those on the call, please enter your questions in the Q&A panel at the bottom of your screen, and then we'll pause for just a minute or two to let questions come in. Not seeing anything just yet, Matt, but let's just take a few more seconds.

Maybe I'll just make a comment from our last call where the question inquired about the potential for high P&V pricing to increase given the issue that happened at South32's Brute Island asset off the western coast of Western Australia. This asset provides 15% of the world's manganese ore. And in April, a cyclone went through and a ship destroyed the wharf and loading facilities. South32 has said that that may be back in operation in Q3 2025. But what we've seen with this decrease of high-grade ore is an increase of 50% in the high-grade ore price. That is now flowing through to the metal, and we expect it to flow through to the... to the high purity sulfate we're already seeing a slight uptick and information from the international manganese institute indicated that with these oil prices most of the processes not all of the processes in china will be loss making It's also worthy to note that the two Western producers of high purity manganese products today do not have their own ore. So they're not integrated and therefore they're also exposed to this higher ore price. So we anticipate their prices will also increase in the market. Okay, no other questions. No questions, Matt. Okay.

Thanks, everyone. Over to you, Matt, please.

Thanks, everyone, for dialing in today and listening to our quarterly update. We look forward to updating you in our next quarterly call.