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

Please note, this webcast is being recorded, and a replay will be available on our website in due course. The slides that we use today can be downloaded from our website as well. [Operator Instructions] Before we begin, note that this presentation does involve forward-looking statements, please refer to our cautionary statements here and the risk factors in our annual information form. Our management discussion and analysis and financial statements as at fiscal Q1 ending December 31, 2023, were filed on February 14, 2024. All of these materials are available on our website, SEDAR+ and ASX. Over to you, Matt.

Good morning, and good afternoon to everyone. Thank you for joining us to review developments during Euro Manganese's first fiscal quarter. Martina Blahova, Chief Financial Officer, is unable to attend today's conference call, so I will first take you through financial highlights for the quarter, and the company's financial position. Then we will run through key developments during the quarter and how we performed against our key catalysts. I'll also go through upcoming catalysts for the year ahead. We'll wrap up with questions and answer session. Just a reminder that our fiscal year end is 30th of September, so our Q1 references the period September through December 2023. We also report in Canadian dollars. I'll briefly comment on our cash position at the end of the quarter. We started the quarter with $7.6 million in cash, $0.4 million was spent to advance the commissioning of the demonstration plant which is nearing completion. $2.3 million was spent on operational expenditures, which included the advancement of the Chvaletice permitting and other corporate costs. Net proceeds from the Orion convertible loan were $23.2 million. We closed the acquisition of EP Chvaletice for $3.3 million. We also made land acquisitions and lease payments of $0.4 million. Therefore, we closed the quarter with $24.3 million in the bank. The net proceeds for the first USD 20 million tranche of the Orion convertible loan facility, which closed during the quarter are expected to provide sufficient funding to complete project permitting, demonstration plant commissioning and back to operation and the acquisition of certain remaining land parcels required for the project. We also expect to be able to initiate the FEED phase of the EPCM contract and certain site preparation works as well as fund general and administration expenses. Here's an overview of key highlights during the quarter and to date. Most noteworthy is the closing of the USD 20 million initial tranche of funds under the previously announced USD 100 million in nondilutive financing package with Orion Resource Partners. In November, we successfully produced on-spec high-purity manganese sulfate on our demonstration plant in the Czech Republic. This is an important achievement for de-risking our process flow sheet and further advancing our offtake discussions with customers. Also in the quarter, we secured a definitive lease agreement with ?EZ, which, together with previously announced land access agreements, and the ?EZ Lease Agreement now provides us with access to approximately 85% of the main lease reserves in the Chvaletice tailings area. We continue to make progress with our offtake negotiations and now have close to 200% of our forecast production under discussions with potential customers. A key development subsequent to the quarter was the advancement of our debt financing process with the European Investment Bank to appraisal status. I'll provide more details on that in the coming slides. As I mentioned earlier, in November 2023, we announced a USD 100 million funding package with Orion. This financing agreement is a tremendous endorsement of the importance of the Chvaletice project and a viability to deliver this project to the highest of standards. To reiterate the USD 100 million is split into 2, USD 50 million components. A USD 50 million loan facility with a 12% per annum interest rate convertible into a 1.29% to 1.65% royalty on project revenues and a USD 50 million in exchange from 1.93% to 2.47% royalty on project revenues following a final investment decision. The USD 50 million convertible loan to royalty facility is further split into 2 tranches, USD 20 million on [ frozie ], which was received at the end of November 2023, and USD 30 million on meeting certain commercial milestones. All aspects of the funding package were structured to meet project finance bankability requirements, which is alongside and reduce the project finance debt and equity required for the full project financing. Furthermore, the tranche structure minimizes the cost of funds and ultimately facilitates a pathway to a final investment decision. During the quarter, we produced on-spec high-purity manganese sulfate monohydrate which further de-risks our process flow sheet. Two independent external laboratories confirmed samples sent for testing met the demonstration target specifications of high purity manganese sulfate monohydrate with low levels of impurities. The team is gaining valuable insights from the operation of the demonstration plant, which are leading to further engineering and operational process improvements, which we can incorporate in our final plant design. The revised environmental and social impact assessment we submitted to the Czech Ministry of Environment in September 2023, we've passed through the public commentary period during the quarter, and no comments were received either from the public, engineers or the municipalities. From our ongoing discussions with the ministry, we continue to expect approval imminently. Upon ESIA approval, we will be able to proceed with the submission of the remaining land planning permit and the construction plan and documentation, which will come from our FEED engineering program with Wood. We've made significant advancements on both land access and land rezoning for Chvaletice project during Q1. As we outlined last quarter, we concluded a definitive lease agreement with ?EZ, which provides us with access to approximately 60% of the manganese reserves in the historical tailings area. Together with previously announced land access agreements, having ?EZ Lease Agreement, the company has secured access to approximately 85% of total project reserves. Negotiations are progressing on a final 15%. We recently completed the land acquisition for an initial residue storage facility within the overall protected deposit area. This can be seen as the green triangle on the top right of the map on this slide. This allows the operation to commence mining and concurrently replace our project tailings in the residue storage facility. The residue storage facility will then extend into the previously mined area. And as each session is filled, it will be remediated as the mining progresses through the resource. Also in October, the land rezoning of -- here's what I'll do, the rezoning of land from mining use was completed. At the same time, re-zoning will require areas within the commercial plan side were reclassified for heavy industry use. This concludes all rezoning requirements for the Chvaletice project, a 3-year process. We continue to generate significant interest in our high-purity manganese, and our offtake funnel has grown significantly. Tonnages under discussion are now almost twice out of our capacity. With the new offtakers elevated the funnel, we now have more than 30 parties at the top with more than 70,000 tonnes of high-purity manganese sulfate per annum in aggregate under discussion. Many of these new potential customers are yet to provide tonnages so there is significant upside potential. A total of 12 parties are in the middle of the funnel with the total interest having increased from 50,000 tonnes to approximately 150,000 tonnes of high-purity manganese sulfate monohydrate per annum. At the sharp end in the funnel, we have 10 parties, 1 with a signed term sheet and 9 in advanced stages of negotiations with a combined interest of over 115,000 tonnes of high-purity manganese sulfate per annum. I would reiterate that these are initial tonnages from offtakers and these potential customers have indicated a need for higher tonnages as the market grows. And as manganese rich chemistries evolve, we continue to see increased in use flow of commercialization of manganese rich chemistries, including NMC, nickel manganese cobalt; LMFP, where manganese is being added to LFP; and in sodium-ion, where manganese is also used in the cathode. We're also seeing a demand for manganese grow as cobalt-free chemistries evolve, NMX and LMNO. Euro Manganese remains very well positioned to meet the increasing need for high purity manganese in lithium-ion batteries. We have the only manganese resource in the EU and stand to benefit from increasing demands through local responsibly produced source of supply. We made significant progress on a number of our key catalysts in 2023. With on-spec high-purity metal and high-purity manganese sulfate produced from our demonstration plant, we can now supply bulk samples required by potential offtake customers on our larger-scale tests. Following a gap analysis, which was completed last quarter, Wood has now progressed to the FEED part of the EPCM contract. In January this year, we appointed Mr. Tim Kindred as Project Director of the Chvaletice Manganese Project. Tim is a highly skilled project and operations leader in the mining and metals industry. His skills and capabilities in developing complex battery metal projects, together with his proven track record in delivering large-scale projects on time and on budget will be extremely valuable for us as we progress both FEED and EPCM work, including the construction of the Chvaletice project. We welcome Tim to the Euro Manganese team. As I outlined earlier, the Chvaletice manganese project has advanced some formal under appraisal stage with the European Investment Bank, a debt funding. This underscores EIB's commitment to supporting sustainable opportunities in the battery supply chain. Chvaletice remains the only sizable proven and probable reserve for manganese in the European Union. And through the project, Euro Manganese will be uniquely positioned to provide a secure, traceable and responsibly produced supply of high-purity manganese products to the European electric vehicle market. With the European Bank for Reconstruction and Development, already a key stake -- 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. In 2024, we remain focused on advancing our flagship project in Europe. Our key goals include progressing the remaining work on the FEED phase of the EPCM contract, completing the remaining land access agreement, advancing project permitting, securing additional offtake term sheets and contracts, commencing the formal project debt finance process and securing a strategic investor at the project level, as well as progressing the feasibility study for the Bécancour dissolution plan subject to financing. To wrap up, I'd like to express my gratitude for the team's efforts and for the ongoing support of our shareholders, particularly in these tough equity 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.

Thanks, Matt. [Operator Instructions] Matt, we're not seeing any questions, so I'll pass it back over to you for wrap up.

Okay. Thank you very much, Neil. So thank you, everyone, for attending this quarterly call. And we look forward to updating you on Q2 in the near future. Thanks very much.