Euro Manganese Announces PEA Results for Chvaletice Manganese Project with an after-tax Net Present Value of US$593 Million
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NR 2019-01
For Immediate Release
Euro Manganese Announces PEA Results for Chvaletice Manganese Project
with an after-tax Net Present Value of US$593 Million
Vancouver, Canada (January 30, 201 9) – Euro Manganese Inc. (TSX-V/ASX: EMN) (the " Company" or
"EMN"), today announced the results of the Preliminary Economic Assessment (“ PEA”) for the
development of Western Europe’s largest manganese deposit owned by Mangan Chvaletice s.r.o .
(“Mangan”), a 100% owned subsidiary of EMN in the Czech Republic, the Chvaletice Manganese Project
(“Chvaletice Manganese Project ”, “CMP”, or “ Project”), and provided further information for the
Company’s development plans for 2019 . All economic values are in US dollars unless indicated
otherwise.
HIGHLIGHTS:
• PEA based on the recycling of a 27 million tonnes Measured and Indicated tailings resource
(98.3% Measured) with a combined grade averaging 7.33% Mn, without the requirement of
any hard rock mining, crushing or milling.
• 25-year project operating life producing 1.19 million tonnes of high-purity electrolytic
manganese metal (“HPEMM”), two-thirds of which is expected to be converted into high-
purity manganese sulphate monohydrate powder (“HPMSM”).
• Saleable product includes 404,100 tonnes of HPEMM and 2.35 million tonnes of HPMSM,
focusing principally on Europe's rapidly emerging electric vehicle battery industry.
• Flexibility to supply either HPEMM or HPMSM, to suit customer preference.
• Pre-tax NPV of $782 million and after tax NPV of $593 million, using a 10% real discount rate.
• $404 million in pre-production capital, $24.8 million in sustaining capital, and $31 million in
working capital, with an ungeared, pre-tax 25.2% IRR with a 4.5-year payback, and a post-tax
22.6% IRR with a 4.9-year payback.
• Project economics are based on projected average HPEMM (containing 99.9% Mn) price of
$4,617/tonne and HPMSM (containing 32% Mn) price of $2,666/tonne over the project life.
• Targeting production of ultra-high-purity electrolytic manganese metal with specifications
exceeding 99.9% Mn and ultra-high-purity manganese sulphate monohydrate with a minimum
manganese content of 32.34%, which exceed typical industry standards.
• Exceptionally green project credentials. Project designed to meet or exceed all Czech and
European safety, health and environmental standards, to remediate the Chvaletice tailings
and arrest ongoing pollution related to unlined historical tailings piles.
• Access to excellent transportation, energy and community infrastructure.
• Proposed process plant site to be located in an industrially-zoned brownfields site, where a
historical process plant generated the Chvaletice tailings.
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• Sophisticated, stable and business-friendly European Union jurisdiction that is highly
supportive of new and, especially, green investments.
• Robust project economic potential and rapidly growing market demand for high-purity
manganese products support a wide range of potential financing alternatives.
• Opportunities exist to enhance returns through process optimization initiatives and various
investment incentives that may be available through the Czech Republic and European Union.
• Next steps: Build and commission a Demonstration Plant in 2019 to produce multi-tonne, High-
Purity Manganese product samples for customer testing and qualification, in conjunction with
ongoing studies leading to completion of a feasibility study and submission of permit
applications that will require further environmental investigations.
Marco Romero, President and CEO of EMN, commented:
"The PEA demonstrates the compelling potential of the Chvaletice Manganese Project. Euro Manganese
is in a unique position in the battery industry, with its 100% holding of Western Europe’s most significant
and strategically- located manganese deposit . What makes this p roject even more significant for an
automotive industry focused on making our world greener, and for other consumers striving to secure
sustainably produced raw materials, is that these products would be produced by recycling waste.”
Dr. Roman Shklanka, Chairman of EMN, added:
“The advent of electric vehicle manufacturing is transforming the entire global automobile industry.
Revolutionary changes are taking place before our eyes and these have created unprecedented
opportunities for an entirely new battery raw materials supply chain. M anganese is emerging as a key
component in the dominant formulations of lithium-ion batteries, which are expected to drive strong
demand for highly -refined manganese products well into the coming decades. A great deal of high-
purity manganese materials production capacity needs to be brought on stream to meet the
requirements of electric vehicle battery makers alone. Our plan is to be there for them, as a reliable
supplier of environmentally -superior, high- purity manganese products. Our strategic location in the
Czech Republic, central to a major emerging cluster of electric vehicle plants and a related ecosystem of
chemical, cell and battery producers , our 25-year Project operating life, and our focus on the green
production of high-purity manganese products made from the remediation of an old environmentally -
impacted site, has attracted the attention of lithium-ion battery, battery precursor and cathode makers
around the world.”
Mr. Romero continued, “ Our Project team is now focused on further defining and refining our plans to
advance the Project through front -end engineerin g and optimization work, and on the efficient
progression of Project permitting. Planning, process engineering design and metallurgical test work are
ongoing, ahead of the upcoming feasibility study, which we target completing by late 2019. Our plan for
this year includes building and operating a demonstration plant capable of producing multi-tonne, high-
purity manganese product samples for customer testing and qualification. Our 2019 plans also include
intensifying community, stakeholder and regulatory consultation, and the filing of Project Permit
Application.”
The PEA is based on a Measured and Indicated Mineral Resource Estimate, as detailed in the NI 43 -101
and Technical Report prepared by Tetra Tech on January 28, 2019, a copy of which is filed on SEDAR and
can be found on the Company’s website. The JORC Technical Report is expected to be lodged with the
Australian Securities Exchange (“ASX”) within the next week. None of these Mineral Resources have
been converted to Mineral Reserves. The PEA is considered preliminary in nature and includes estimated
costs that are subject to an approximate margin of error of plus or minus 35%. Accordingly, there is no
certainty that the PEA will be realized. Mineral Resources that are not Mineral Reserves do not by
definition have demonstrated economic viability.
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This PEA was compiled and project -managed by Tetra Tech Canada Inc. (“ Tetra Tech”), Vancouver, with
major input from CINF Engineering Ltd (“CINF”) (comprehensive process design, plant engineering,
equipment selection and testing ), Changsha Research Institute for Mining and Metallurgy (“ CRIMM”)
(metallurgical testwork, process design, product development and pilot plant testing), Bilfinger Tebodin
Czech Republic (“ Tebodin”) (Czech and European cost estimati on, localization and environmental
services), GET s.r.o. (“GET”) (geology and sampling, environmental and tailings extraction planning) and
Sudop Ltd ( railway infrastructure design study) . An updated NI 43-101 Technical Report on the
Chvaletice Manganese Project including results of the PEA will be filed within 45 days on SEDAR and
made available on the Company’s website.
Project Design Approach and Benefits to Local Residents
• The CMP process plant is being designed to reliably and cost -effectively produce HPEMM and
HPMSM products that meet or exceed all known customer specifications, including those for
low-cobalt NMC cathode formulations, while complying with the stringent Czech Republic and
European Union health, safety and environmental standards. In setting the life of the Project at
25 years with stable production levels , the goals of providing a long -term stable product supply
for our customers, market stability and economic benefits for local communities and the citizens
of the Czech Republic, were balanced against the generation of acceptable rates of return for
the long-term investment that are required by EMN to develop the Project.
• The Project is designed to produce high -purity manganese products, anticipating custo mer
specifications for the emerging specifications for low-nickel battery formulations, produced with
the cleanest technology available , assuring customers product quality , verifiable provenance
and n small environmental footprint.
• The Project would result in the environmental remediation of a polluted site, where metals and
other compounds currently leach into the groundwater. As extraction, reprocessing and proper
disposal of the Chvaletice tailings is c arried out, the site will be progressively rehabilitated to be
in compliance with Czech and European environmental requirements.
• Modern, conventional and commercially -proven technologies that are employed in a variety of
industries were incorporated in the various components of the CMP process flowsheet.
• The Company has extensively engaged and plans to continue meaningful consultation with local
residents, communities, organizations and regulatory agencies, soliciting active local
participation and input in the Project’s evaluation and planning process.
• Since the inception of the CMP, the Company has sought -out, trained and helped to develop
numerous talented Czech professionals. EMN expects that the project would employ Czech
residents during construction and operations. The Project would be expected to employ
approximately 400 people during operations.
• During its construction period and its 25 -year life, total expenditures within the Czech Republic
are estimated at $2.70 billion (CZK 62.0 billion), which would include corporate and payroll taxes
and royalties payable within the Czech Republic of approximately $1.07 billion (CZK 23.8 billion).
PEA Summary and Economic Analysis
The following summarizes the material assumptions used in, and the results of, the PEA , assuming a
targeted start of production in the second half of 2022:
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Table 1: Economic and Operations Summary (M = Millions, K = Thousands)
Product Price Assumptions Life of Project/Average
High-purity electrolytic manganese metal (“HPEMM”) (1) $4,617 per tonne
High purity manganese sulphate monohydrate (“HPMSM”) (1) $2,666 per tonne
Capital Requirements
Initial Capital requirements $403.9 M
Life of Project Sustaining Capital (excludes $2 55 M in maintenance costs
which are included in operating costs) $24.8 M
Working Capital $30.5 M
Operating Costs (per tonne plant feed)
Tailings extraction $2.02/t
Magnetic separation, HPEMM & HPMSM processing $90.21/t
Tailings stacking/storage, site services, and water treatment $5.76/t
General and administrative $5.04/t
Contingency on operating costs $8.24/t
Total Site Costs $111.28/t
Freight and Insurance, Selling costs and Royalties (per t plant feed)
Freight and insurance, and selling costs $14.94/t
Czech Government royalty (2) $4.53/t
Net smelter returns (“NSR”) royalty, on sales less allowable costs (3) $3.40/t
Total cost per tonne plant feed $134.14/t
Production Summary
Life of project operations 25 years
Chvaletice tailings extracted & processed 26,828 K tonnes
Total manganese grade 7.33%
Contained Manganese (Mn) 1,967 K tonnes
HPEMM produced 1,186.4 K tonnes
HPEMM further processed into HPMSM 782.3 tonnes
HPEMM sold 404.1 k tonnes
HPMSM produced/sold 2,345.0 K tonnes
Total Mn contained in HPEMM & HPMSM 1,165 K tonnes
Overall Mn recovery 59.2%
Project Economics Before-Tax After-Tax
Net Present value, (10% real discount rate) $781.6 M $593.2 M
Internal Rate of Return 25.2% 22.6%
Payback (from start of processing) 4.5 Years 4.9 Years
Cumulative Cash Flow, undiscounted $4,088.8 M $3,291.8 M
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Notes:
1. Average real selling prices per tonne of HPEMM (99.9% Mn content) and HPMSM (32% Mn content) for the period as
projected in a market study prepared for the Company by CPM Group LLC, entitled “Market Outlook for High- purity
Electrolytic Manganese Metal and High-purity Manganese sulphate monohydrate ,” dated January 21, 2019.
2. Czech government royalty is 2,308 Czech Koruna (CZK) per tonne of Mn produced, translated to USD at a projected CZK to
USD exchange rate of 22.14.
3. A 1.2% NSR royalty is payable to the founding shareholders of Mangan.
Table 2: Total Life of Project Revenue, Costs and Cash Flows
Projected Cash Flows Life of Project (M)
Total HPEMM Revenue $1,865.7
Total HPMSM Revenue $6,251.3
Freight, Insurance and Selling costs $400.8
Czech Government Royalties $121.4
Revenues, net of above costs $7,594.8
NSR Royalty $91.1
Site Operating Costs $2,985.3
Capital Costs (initial, sustaining and demolition less salvage value) $429.6
Project Cash Flow (pre-tax) $4,088.8
Taxes $797.0
Life of Project Undiscounted Cash Flows $3,291.8
The Czech corporate income tax rate is 19%. In addition to the royalty of CZK 2,308 per tonne of unit
Mn produced, t he Czech Republic has various payroll and other taxes to generate revenue. The
Company has chosen to model the economics of this project conservatively from a tax perspective, with
a full tax burden, based on Czech legislated tax rates . Investment incentives exist in the Czech Republic
and the European Union for certain, qualified investments, including investment tax credits, grants, and
accelerated depreciation. The Company will take advantage of these opportunities as it advances the
Project through the feasibility study stage.
Sensitivity Analysis
A sensitivity analysis for the Chvaletice Manganese Project was carried out to determine the effects of
key variables in relation to the post-tax NPV of $593 million at a real discount rate of 10%. The results of
the sensitivity analysis are presented in Table 3 below.
Table 3: Project Sensitivity Analysis
Sensitivity Change from Base
Case (M) After-tax NPV (M)
Base NPV $593
Discount rate, 12% $(175) $418
Discount rate, 8% $238 $831
HPEMM/HPMSM average prices +10% $176 $769
HPEMM/HPMSM average prices -10% $(175) $418
Total capital +10% $(35) $558
Total capital -10% $36 $629
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Sensitivity Change from Base
Case (M) After-tax NPV (M)
Total operating costs +10% $(74) $519
Total operating costs -10% $74 $667
Recoveries +10% $57 $650
Recoveries -10% $(58) $535
Initial and Sustaining Capital Estimates
Capital expenditure estimates have been prepared for both initial and sustaining capital. A projected
summary timeline of scheduled capital costs is shown in Table 4.
Table 4: Initial Capital and Sustaining Capital Schedule
Year Initial Capital (M) Sustaining Capital (M)
Pre-operations, year 2 $161.5
Pre-operations, year 1 $242.4 -
1 - $0.7
2 - $0.2
3 - $0.2
4 - $0.2
5 - $5.0
6 - -
7 - -
8 - 25 - $18.5
Total $403.9 $24.8
The expected initial capital expenditures (Table 5) for the Project, inclusive of capitalized operating start-
up costs, as estimated by Tetra Tech, as of January 1, 201 9, are $ 403.9 million, including all
development-related costs that will be incurred prior to the envisaged commencement of commercial
operations. Capital costs incurred after start -up are assigned to sustaining capital and are projected to
be paid out of operating cash-flows (also see Table 5). Contingencies on initial capital expenditures have
been added at appropriate percentages to each component of the P roject, excluding capitalized
operating costs, resulting in an overall contingency of $44.2 million or 17% of direct costs. Life of project
maintenance costs are estimated to be $255 million, or average $10.2 million per annum.
Table 5: Initial and Sustaining Cost Estimates
Item Pre-Production
Initial Capital (M) Sustaining Capital (M)
Overall site costs $35.1 -
Tailings extraction $2.2 $4.8
Process $166.8 $12.0
HPMSM process, from 99.9% HPEMM $25.4 $8.0
Tailings, residues management $4.4 -
On-site Infrastructure $21.1 -
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Item Pre-Production
Initial Capital (M) Sustaining Capital (M)
Subtotal, direct costs $255.0 $24.8
Project Indirect costs $72.7 -
Owner’s costs $32.0 -
Contingency $44.2 -
Total $403.9 $24.8
Note: Totals may not add exactly due to rounding.
The Project site is served by excellent existing infrastructure , including rail, highway, a gas pipeline,
water and is adjacent to an operating power plant . The proposed plant site is zoned for industrial use
and is the site of the former process plant that produced the Chvaletice tailings. New and refurbished
infrastructure that will be built to service the Project include a tailings excavation and handling facility: a
south and north site connection bridge f or transporting tailings slurry, return water pipes and the tube
conveyor that returns a mixture of non-magnetic tailings and washed leach residue to the residue dry
stacking area; a m agnetic separation beneficiation plant ; e nclosed and winterized process plant
buildings and various reagent storage facilities and product warehouse ; an u pgraded rail spur system
with related loading/unloading facilities; an internal road network; an electrical supply system, including
two 110 kV step -down substations, four 380 V/36 kA rectifier transformers and local step -down
transformers; a p rocess equipment maintenance workshop ; a mobile fleet maintenance workshop ;
spare part and maintenance supply warehouses ; a comprehensive w ater management system
laboratories; and general administrative offices.
Operating Cost Estimate
Onsite operating costs are expected to average $ 111.28 per tonne plant feed ($ 2.57 per kg Mn
equivalent) with offsite operating costs estimated to average $ 22.87 per tonne plant feed ($0.52 per kg
Mn equivalent), as shown in Table 6.
Table 6: Life of Project Operating Costs
Operating Costs (“Opex”) Total (M)
$ per tonne Plant
Feed
$ per kg Mn
Equivalent
Extraction costs $54.2 $2.02 $0.05
Magnetic Separation and processing to HPEMM $2,019.0 $75.26 $1.74
Processing of HPEMM to HPMSM $401.1 $14.95 $0.34
Tailings stacking/storage, site services and water
treatment $154.5 $5.76 $0.13
General and administrative $135.3 $5.04 $0.12
Contingency on operating costs $221.2 $8.24 $0.19
Subtotal, Onsite Opex $2,985.3 $111.28 $2.57
Freight and insurance, and selling costs $400.8 $14.94 $0.34
Czech Government royalty (1) $121.4 $4.53 $0.10
NSR royalty, on sales less allowable costs (2) $91.2 $3.40 $0.08
Subtotal, Offsite Opex $613.4 $22.87 $0.52
All-in Opex $3,598.7 $134.14 $3.09
Notes:
1. Czech government royalty is 2,308 Czech Koruna (CZK) per tonne of Mn extracted, translated to USD at a projected CZK to
USD exchange rate of 22.14.
2. A 1.2% NSR royalty is payable to the founding shareholders of Mangan.
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Resource Estimate
Tetra Tech was engaged to oversee the planning and execution of sampling and assaying, to prepare the
updated Resource Estimate for EMN's Chvaletice Manganese Project, to prepare the Technical Report in
accordance with National Instrument 43 -101 - Standards and Disclosures for Mineral Projects , and to
prepare the independent JORC Code technical report in accordance with the Joint Ore Reserves
Committee Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
2012 Edition (“JORC Code ”). The 43 -101 Technical Report, entitled “Technical Report and Mineral
Resource Estimate for the Chvaletice Manganese Project, Chvaletice, Czech Republic”, with an effective
date of December 8, 2018, was filed on SEDAR on January 28, 2019. The JORC Code Technical Report is
expected to be lodged with the ASX within the next week.
The updated Mineral Resource Estimate resulted in a reclassification and upgrade of the tailings
contained in the three Chvaletice tailings cells to Measured and Indicated categories, from Indicated and
Inferred. The Project's combined Measured and Indicated Resources now amount to 26,960,000
tonnes, grading 7.33% total manganese and 5.86% soluble manganese, as detailed in Table 7 below:
Table 7 - Chvaletice Mineral Resource Statement, Effective December 8, 2018
Tailings
Cell # Classification
Dry In -
situ Bulk
Density
(t/m3) Volume (m3)
Tonnage
(metric tonnes) Total Mn (%) Soluble Mn (%)
#1 MEASURED 1.52 6,577,000 10,029,000 7.95 6.49
INDICATED 1.47 160,000 236,000 8.35 6.67
#2 MEASURED 1.53 7,990,000 12,201,000 6.79 5.42
INDICATED 1.55 123,000 189,000 7.22 5.30
#3 MEASURED 1.45 2,942,000 4,265,000 7.35 5.63
INDICATED 1.45 27,000 39,000 7.90 5.89
TOTAL MEASURED 1.51 17,509,000 26,496,000 7.32 5.86
INDICATED 1.50 309,000 464,000 7.85 6.05
COMBINED M&I 1.51 17,818,000 26,960,000 7.33 5.86
Notes:
1. Estimated in accordance with the Canadian Institution of Mining, Metallurgy and Petroleum ("CIM") Definition Standards
on Mineral Resources and Mineral Reserves adopted by CIM Council , as amended, which are materially identical to JORC
Code.
2. The Chvaletice Mineral Resource has a reasonable prospect for eventual economic extraction. Mineral Resources do not
have demonstrated economic viability, and no Mineral Reserves have been defined for the Project.
3. Indicated Resources have lower confidence that Measured Resources. A break -even grade of 3.20% total Mn has been
estimated for the Chvaletice deposit based on preliminary pre- concentration operating costs of US$5.22/t feed, leaching
and refining operating cost estimates of US$173/t concentrate, 63% recovery for magnetic separation derived from the
average total Mn recovery of 87.7% on the average head grade, 71% recovery for leaching and refining, and a metal price
of US$2.00/kg for 99.7% EMM (Shanghai Metals Market, Dec 2018). The price for high purity 99.9% E MM is expected to
be higher.
4. A cut-off grade has not been applied to the block model. The estimated break -even cut-off grade falls below the grade of
most of the blocks (excluding 10,000 tonnes which have grades less than 3.20% total Mn ). It is assumed that material
segregation will not be possible during extraction due to inherent difficulty of grade control and selective mining for this
deposit type.
5. Grade capping has not been applied.
6. Numbers may not add exactly due to rounding.