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Home » Popular Markets » Equities » Euro Manganese buys back Chvaletice project royalties for $4.5m

Euro Manganese Inc. (TSX-V / ASX: EMN), the battery materials company whose principal focus is to develop the Chvaletice Manganese Project in the Czech Republic, has agreed to pay $4.5m to buy out a 1.2% net smelter return (NSR) royalty.

As part of the deal when Euro Manganese bought the 100% interest in the project in May 2016, it agreed to grant the previous owners the NSR royalty, being a share of the future net revenues generated from the sale of the manganese to be extracted from the tailings of the long-decommissioned mine.

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Euro Manganese estimates that the net result of buying out the royalty, based on a preliminary economic assessment (PEA) completed in early 2019, would be to eliminate $91.1m in expenditures over the project’s 25-year life, reduce operating costs by $3.40 per tonne of plant feed (or 2.5% of total cost per tonne of plant feed) and increase the after-tax net present value of the project by $25.3m (approximately 4%) using the PEA’s 10% discount rate. All economic assumptions and results will be updated as part of the project’s feasibility study, which is targeted for completion in the first quarter of 2022.

Euro Manganese CEO Marco Romero said: “Based on the 2019 PEA results and assumptions, this royalty buy-out enhances the Project’s economics, and the payment terms allow the Company substantial financial flexibility. We continue to evaluate other potential value-enhancing opportunities for the Project.”

Under the terms of the Royalty Termination Agreements, the first instalment, equivalent to 20% the purchase price of $4.5m ($900,000), was paid on May 31, 2021. The remaining $3.6m is due to be paid by January 31, 2022 either in cash or as a 50/50 mix of cash and shares.

Over-subscribed private placement worth AUD 30m

A week before the NSR announcement, Euro Manganese had successfully raised AUD$30 million (US$24m) in an oversubscribed private placement completed earlier in the month. The funds will be used to commission the company’s manganese demonstration plant, complete the project’s permitting and feasibility study and all technical work required in preparation for the final investment decision expected in 2022.

The project’s feasibility study is expected to provide the design, cost and scheduling details needed to arrive at a final investment decision and secure full financing for the Project. Once operational, the project is expected to be one of the world’s largest producers of high purity manganese, with an expected annual output of around 50,000 tonnes for 25 years.

Euro Manganese has worked closely with local regulators and other authorities to ensure that the project operates to strict environmental standards. Located 90 km east of Prague in the Czech Republic, the project is strategically located in the heart of the European continent to supply the automotive manufacturers in the region, which are all in the process of transitioning to the production of electrical vehicles.

The project also stands to become the only sizeable manganese resource in the European Union, with the potential to provide up to half of projected European demand for high-purity manganese for batteries by 2025, and therefore play a key role supporting the plans of the EU to build a European battery raw materials supply chain. EU-backed organisation EIT InnoEnergy has described the Chvaletice Manganese Project as a “milestone moment” for Europe’s auto industry.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

James Norris

James Norris

James is a highly experienced writer and editor, gained from more than 20 years in the financial services industry, in particular wealth management and asset management.

He initially worked as a financial journalist for a number of leading media brands, including the FT Group, Financial News, Euromoney and Incisive Media, covering most aspects of the asset management industry. More recently, James switched to work as an in-house content specialist for fund management and wealth management groups, including JP Morgan Asset Management, Quilter Cheviot Investment Management, AXA Investment Managers and Invesco Perpetual.

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