Euro Manganese Inc. (EMN.V) Earnings Call Transcript & Summary

Hello, everyone, and welcome to today's event. Today, we are using Zoom Webinar. [Operator Instructions] And with that, we can get started. I'll hand the things over to Matt.

Good morning, good afternoon, good evening to everyone dialing in today. Thank you for joining us to review our first fiscal quarter highlights. Please note the slides for today's call can be downloaded from our website. Before we begin, I'd like to remind you that this presentation involves forward-looking statements. Please refer to our cautionary statements here as well as the risk factors set out in our annual information Form. Our news release filed last week highlights our first fiscal quarter financial position. This should be read in conjunction with our management discussion and analysis and financial statements, both of which are available on our website, SEDAR and the ASX. Joining me on the call today are Martina Blahova, 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 financial highlights for the quarter and the company's financial position. Then I'll run through operational highlights achieved in the quarter and look at key catalysts for 2023. We'll wrap up with a question-and-answer session. Over to you, Martina.

Thank you, Matt. Just a reminder that we report at year-end of 30th of September. So our Q1 reference is the period October through December 2022. 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 $21.6 million in cash million. $0.6 million was spent to complete the installation of the demonstration plant and the purchase and refurbishment of an administration building next to the demonstration plant, which also serves as an additional facility for the plant's staff. $2.8 million was spent on operating expenditures, which covered the start of the demonstration plant commissioning, the completion of the environmental and social impact assessment for filing, and other corporate costs. We made a payment of $0.2 million on an option for land planned for the rail spur in the commercial plant area, and we also received $0.2 million from the exercise of share options. We closed the quarter with $18.3 million in the bank. Our cash position will allow us to complete the commissioning and operation of the demonstration plant for approximately 1 year. And these funds are also expected to cover other permitting costs for the project as well as completing or advancing certain land acquisitions for the commercial plant area, completion of the EPCM tender process and corporate G&A costs for the next 9 months. I will now turn it back to Matt.

Thanks, Martina. Here's a snapshot of achievements during the quarter and to date. I'll speak to each of these items in more detail in the coming slides, but the key takeaway is we met our milestones for 2022, and we've maintained that momentum in the first 6 weeks of 2023. We began this year with quite a bit of news flow, the most significant of which was the off-take term sheet with Verkor, who ought to be a key battery supplier to Renault. The term sheet outlines minimum tonnages on a take-or-pay basis for an initial tenure of 8 years, with deliveries commencing from first production, which is expected in 2027. The term also outlines pricing, which is based on an index-adjusted western price benchmark for high-purity manganese sulfate that also correlates to the CO2 footprint of high-purity manganese sulfate from Chvaletice. It also has a floor price. We are now working with Verkor to advance to a full off-take contract. Alongside this, we continue to advance off-take discussions with other interested parties across the EV supply chain in Europe and in North America. These are a result of the structured off-take tender process for our high-purity manganese products that we commenced in September 2022. We made a data room available and hosted site visits for interested parties. Indicative bids have been received in addition to the 5 MOUs currently in place. I spoke to the increasing trend of automotive OEMs, investing in resource and processing projects to secure critical raw materials for EV vehicles on our conference call in December. Since then, we've seen what I believe to be a watershed investment of GM into Lithium Americas to finance their Thacker Pass project. GM's $650 million investment is the largest to date by any OEM into battery raw materials and is a transformative precedent for critical minerals partnerships. It's yet another example of the importance of local raw material supply security and accelerating the energy transition. We released 2 life cycle assessments last year, and I wanted to highlight the results of the benchmarking assessment again. As mentioned in the previous slide, the pricing mechanism in the Verkor term sheet directly correlates to the common footprint of high-purity manganese sulfate produced at Chvaletice. This demonstrates the tangible commitments of both parties to deliver low-carbon products for the EV market. We are leading the pack in having the lowest carbon footprint versus the current incumbent high-purity manganese industry. This is hugely important for us in our conversations with battery makers and automotive OEMs, who have made their own commitments to net zero and are looking to their supply chains to help them reach that goal. On the 18th of January of this year, the Global Battery Alliance launched the European Battery Passport Pilots, including dedicated rulebooks to establish key sustainability performance indicators related to the battery carbon footprint, child labor and human rights due diligence. EV batteries sold in the year through 2026 will be obligated to report the carbon footprint associated with the overall life cycle of manufacturing batteries, the percentage of recycled content of the battery and human rights and battery supply chain due diligence. Three main takeaways here: one, we're following this closely; two, we're in a strong position to meet these requirements; and three, we believe the superior nature of our high-purity manganese products positions us well to meet current and future demands of the EV battery supply chain. Moving to the project itself. We made great strides in advancing Chvaletice during the quarter and to date. Commissioning of the demonstration plant began in early November and is advancing well. We're on track to produce on-spec high-purity electrolytic manganese metal and high-purity manganese sulfate by the end of calendar 1 2023. Deliveries to interested parties will commence thereafter. Six companies from across the EV supply chain have requested samples and a further 6 companies, who are testing pilot plant samples, are also expected to request demo plant samples in due course. A video demonstration plant process can be viewed at the link here or on our website. Parallel to commissioning, we are also advancing on the engineering, procurement and construction management front. Bid have been received from 5 Tier 1 EPCM firms who are interested in developing the commercial plant at Chvaletice. We are finalizing the evaluation of the bids and aim to appoint the contractor in the near term. Of importance to us is a firm that 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 also to identify long-lead items of process equipment. Another milestone achieved in the quarter was submission of the final environmental and social impact assessment to the Czech Ministry of Environment. This was based on the previous impact assessment study, engagement with key stakeholders, which included outreach with relevant authorities and local communities, project parameters outlining the feasibility study and environment and social impact models, all of which were built and fed into our final EIA submission. We anticipate a 6-month approval process from the December 2022 submission, potentially enabling final environmental permitting for the project by the middle of this year. To further demonstrate our commitment to putting sustainable practices at our core, we published an inaugural sustainability report in December 2022. This details a thorough materiality assessment we undertook earlier last year to identify the environmental, social and governance issues that matter most to us and our stakeholders. Outcomes indicate we are on the right path in taking steps to address areas of high importance to our stakeholders, such as environmental stewardship and mitigating climate change. The report was also an opportunity for us to crystallize the company's purpose, vision and values. I spoke to this on the last quarterly call. And as our global team of approximately 40 grows, it is of utmost importance to me to have a clear north star for who we are as a company, what we're focused on and the values that will underpin our success. The passion that our team exhibits demonstrates that desire to deliver on our vision of being the leading environmentally responsible producer of high-purity manganese globally. Shifting gears to our exciting opportunity in North America, to build a dissolution plant at Bécancour in Quebec. The growth opportunities offered by the North American market are compelling, and the plant at Bécancour will give the company first-mover advantage in this region. As a reminder, North American demand for high-purity manganese is expected to reach approximately 200,000 tonnes by 2031. However, there are no current processing facilities in North America. Bécancour is shaping up as a major EV battery supply chain cluster with 2 large cathode active material projects as well as other critical battery raw material projects announced, high-purity manganese being the missing ingredient there until now. We have secured a long-term option on a central site in Bécancour to enable site due diligence and scoping study of the processing plant, both of which are nearing completion through leveraging and localizing the extensive process development and engineering work already completed for the Chvaletice project. These plans are warmly welcomed by both the Quebec Government and the Canadian Federal Government, with whom the company has entered discussions regarding the clearly structured incentive support programs which may be available for the project. I've spoken to most of these deliverables already today. However, I will just note that we are close to appointing our project finance equity advisers. The key takeaway is we have a busy first half of the year ahead of us, both advising the project and putting in place off-take contracts to underpin our project finance. In the second half of the year, we envisage being focused on project finance and completing front-end engineering work with our EPCM contractor. We are driving towards executing our key catalysts to realize the long-term value for our stakeholders. Thank you, everyone, for tuning in today. I'll now open it up to questions.