CHVALETICE MANGANESE PROJECT
Located approximately 90 km east of Prague in the Czech Republic, the Chvaletice Manganese Project entails re-processing a significant manganese deposit contained in waste (tailings) from a decommissioned mine that operated between 1951 and 1975.
The Chvaletice resource is the only sizeable, classified resource of manganese in the European Union.
Chvaletice is not a mining project. It is a unique and innovative waste recycling initiative that avoids the negative impacts of traditional hard rock mining. As the project recycles historic mine tailings, it will clean up the contaminated site and eliminate a longstanding source of water pollution. Over the 25-year life of the Project, remediation and reclamation work will be conducted to bring the entire Chvaletice site into compliance with the Czech Republic’s stringent environmental regulations and standards.
As a source of an important battery raw material, the Project is well positioned to support the EU and the Czech Republic’s green goals of reducing the region’s carbon footprint and working towards a more sustainable, circular economy.
The Project has the potential to reduce Europe’s reliance on imports of raw battery materials by providing up to 20% of projected 2030 European demand for high-purity manganese.
Commercial development of the Chvaletice resource is expected to create approximately 400 full-time jobs, numerous commercial opportunities for Czech businesses, as well as substantial fiscal revenues for the Czech State and local communities.
Since 2015, during the evaluation and planning phase of the Project, Mangan Chvaletice has proactively and widely engaged with local authorities and community members. The company has benefited from their valuable feedback to refine and improve the Project design and development plan, with the goal of successfully integrating it into the local environment and life of the community.
On July 27, 2022, EMN announced the results of a Feasibility Study (“FS”) for the Chvaletice Manganese Project, having an after-tax NPV of US$1.34 billion using an 8% discount rate, and an after-tax IRR of 21.9%. Please refer to the Feasibility Study section below, and to the Company’s news release dated July 27, 2022. Further information about the FS, including key assumptions, parameters, risks and other factors, will be provided in the NI 43-101 Technical Report on the Chvaletice Manganese Project, which will be filed on SEDAR within 45 days of publication of the FS release.
The presence of manganese and iron minerals was first recorded near the present-day village of Chvaletice in the 1800s, and sporadic, localized mining of the Chvaletice ore body took place during the early 1900s. Starting in the 1930s, ore was processed for the recovery of manganese and shipped by rail to steel mills in Czechoslovakia and Germany. Between 1951 and 1975, the focus turned to the extraction of pyrite, which was used to produce sulfuric acid for various industrial clients. The waste from these operations created the three existing tailings piles that form the Chvaletice deposit. The piles were rehabilitated with a layer of topsoil and trees planted between 1975 and 1983.
In the late 1980s, Bateria Slany - a Czechoslovakian state-owned battery producer - undertook extensive studies of the tailings to determine the feasibility of producing manganese dioxide for the production of dry cell batteries. Although Bateria Slany confirmed the presence of a significant and economically attractive manganese carbonate resource, it halted development following the political regime change that was initiated in 1989, which brought about the end of communism in Czechoslovakia and the establishment of an independent Czech Republic. The deposit lay dormant until its mineral rights were granted in September 2014 to a Czech group of companies. The rights to the Project were then consolidated to form a jointly-owned holding company, Mangan Chvaletice s.r.o.
In May 2016, Euro Manganese Inc. acquired 100% of Mangan Chvaletice s.r.o., the Czech company that holds the exploration rights to the Chvaletice manganese deposit.
The Chvaletice manganese reserve is contained in three adjacent tailings piles that were placed on flat terrain next to the former Chvaletice open pit pyrite mine. The tailings consist of sandy to fine greyish material containing approximately 7.4% manganese, mostly occurring as rhodochrosite and kutnohorite, two mineral forms of manganese carbonate.
Extensive drilling, trenching and bulk sampling of the Chvaletice tailings was undertaken by Bateria Slany between 1986 and 1989, and a reserve was declared under local standards of the time. Between 2014 and 2016, EMN conducted preliminary auger drilling and backhoe pit sampling to assess the qualitative aspects of the tailings and to conduct exploratory metallurgical tests.
In 2017, EMN conducted an extensive Sonic drilling campaign to evaluate the quantitative and qualitative features of the three distinct tailing deposits, to form the basis of a preliminary mineral resource estimate and to collect a representative bulk sample to conduct in-depth metallurgical studies, including a pilot plant high-purity manganese electrolytic metal production test, as well as exploratory high-purity manganese sulfate production tests. The results of this 2017 work program were reported on in a 43-101 technical report dated effective April 27, 2018 (having a release date of June 21, 2018) and entitled “Technical Report on Mineral Resource Estimation for the Chvaletice Manganese Project Chvaletice, Czech Republic” (the 2017 Technical Report”).
NI43:101 - MINERAL RESERVE ESTIMATE
Euro Manganese published a Proven and Probable Reserve Estimate as part of its Feasibility Study, that will be detailed in the updated NI43:101 Technical Report on the Chvaletice Manganese Project. The NI-43-101 report will include results of the FS and be filed within 45 days of the July 27, 2022 release on SEDAR at www.sedar.com and made available on the Company’s website. The JORC Technical Report is expected to be lodged with the Australian Securities Exchange ("ASX") within the same time period.
Mineral Reserves for the Project are based on the Measured and Indicated Resource and adhere to the guidelines set by the Canadian Institute of Mining ("CIM"), NI 43-101 and the CIM Best Practices. The Project’s combined Proven and Probable Mineral Reserve amount to 26,644,000 tonnes, grading at 7.41% total manganese as detailed in the table below.
Chvaletice Mineral Reserve Statement (effective July 14, 2022)
1. Estimated in accordance with the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by CIM Council, as amended, which are materially identical to the JORC Code.
2. The Mineral Resource is inclusive of the Mineral Reserves.
3. Probable Reserves have lower confidence than Proven Reserves. Inferred Resources have not been included in the Reserves.
4. A break-even grade of 2.18% total Mn has been estimated for the Chvaletice deposit based on preliminary pre-concentration operating costs of $6.47/t feed, leaching and refining operating cost estimates of $188/t feed, total recovery to HPEMM and HPMSM of approximately 60.5% and 58.9% respectively and product prices of US$9.60 kg/t for HPEMM and US$3.72 kg/t for HPMSM (CPM Group Report, June 2022). The actual commodity price for these products may vary.
5. Grade capping has not been applied.
6. Numbers may not add exactly due to rounding.
7. Minimal dilution and losses of <1% are expected to occur at the interface between the lower bounds of the tailings cells and original ground as the surface is uneven.
NI43:101 - MINERAL RESOURCE ESTIMATE
A copy of the 43-101 Technical Report dated March 15, 2019, with an effective date of January 29, 2019, entitled "Technical Report and Preliminary Economic Assessment for the Chvaletice Manganese Project Chvaletice, Czech Republic" prepared by Mr. James Barr, P. Geo, Senior Geologist, Mr. Jianhui (John) Huang, Ph.D., P. Eng., Senior Metallurgical Engineer, Mr. Mark Horan, P. Eng., Hassan Ghaffair, P. Eng., and Chris Johns, P. Eng., all with Tetra Tech Canada Inc. ("Tetra Tech"), I 43-101,can be viewed here, or on SEDAR at www.sedar.com under the Company's profile. Tetra Tech, is a leading diversified North American engineering firm with considerable EMM experience.
The JORC Code technical report with an effective date of January 29, 2019 (release date of March 22, 2019) entitled "Public Reporting and Preliminary Economic Assessment for the Chvaletice Manganese Project Chvaletice, Czech Republic" prepared by Tetra Tech Canada Inc. (JORC Report) has been prepared for the purposes of verifying the information in the Chvaletice Technical Report against the JORC Code. A copy of the JORC Report can be viewed here.
A summary of the updated Chvaletice Technical Report 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 summarized below:
Manganese in the Chvaletice tailings is fairly evenly distributed through entire deposit. The deposit contains finely milled, unconsolidated tailings placed above ground, which are expected to result in very low mining and virtually zero ore dressing costs. Approximately, 80% of manganese is contained in leachable manganese carbonate minerals that require no calcination, unlike manganese oxide ore.
EVALUATION, PLANNING AND PATH FORWARD
EMN initiated its investigations on the Chvaletice Manganese Project in 2015. Early work conducted during 2015 and 2016 was focused on:
confirming the results of earlier exploration, metallurgical and engineering studies conducted by a Czechoslovakian State-owned company in the 1980s
determining the manganese content and mineralogy of the Chvaletice tailings
conducting legal and environmental due diligence investigations
conducting exploratory beneficiation, leaching and purification tests on the tailings samples
developing a conceptual process flowsheet to produce high purity electrolytic manganese metal
initiating environmental and hydrogeological baseline studies
Since the acquisition of the project, Euro Manganese Inc. set out to achieve several key objectives to advance the Chvaletice Manganese Project. These included completion of:
environmental baseline studies
an extensive drilling assaying to updating the Mineral Resource Estimate and resource estimation program
a comprehensive beneficiation and hydrometallurgical test work program
an extraction and reclamation plan development
advanced process flowsheet development
community engagement and consultation
preliminary economic evaluation (PEA)
Feasibility Study (FS)
Life Cycle Assessment
The development of the Chvaletice site will require that we design many aspects of the Project to meet stringent Czech and European safety, health, and environmental standards. We are increasingly confident in our ability to do so. Our goal is to develop one of the cleanest and highest-quality manganese products producers in the world, and to turn the clock on the environmental impacts of past mining activity, leaving the site in an improved condition in full compliance with the demanding reclamation and restoration regulations that prevail today.
Based on our findings to date, including the results of the FS, we are increasingly confident in our ability to develop the Project site to accommodate a world-leading, high-purity manganese production facility. We have also recently seen an extraordinary opportunity emerge that could see us become the only primary producer of high purity manganese products in the European Union at a time when automakers are accelerating their transformation to electric vehicle production.
Our team is now focused on a number of key activities that will bring the Project to a final investment decision:
Submission of the ESIA to the Czech MoE, expected in Q3 2022, followed by its approval targeted in the first half of 2023;
Rezoning of the remaining land area underlying the tailings for mining use, which the Company anticipates being approved by the Municipality of Chvaletice by the end of 2022;
Negotiating and completing the remaining land agreements, which would provide access to the outstanding 70% of the total land area required for the Project;
Entering a contract to provide engineering, procurement, construction management ("EPCM") support to the Project;
Executing binding offtake agreements for EMN’s high-purity manganese products to support project financing; and
Developing an optimum financing structure for the Project, which is dependent upon the above milestones being achieved.
FEASIBILITY STUDY HIGHLIGHTS
On July 27, 2022, Euro Manganese announced the results of a FS for the Chvaletice Manganese Project. Please refer to EMN’s news release for a summary of those results.
The following table summarizes the material assumptions used in, and the results of, the FS, assuming a targeted start of production in 2027. Plant commissioning is anticipated to commence in 2026.
SUMMARY OF CHVALETICE FEASIBILITY STUDY (BASE CASE)
We are committed to advancing the Chvaletice Tailings Project while adhering to best practices for corporate governance, environmental excellence and social responsibility.
The Czech Republic is a stable, modern democracy with a free-market economy and a favorable investment, fiscal and legal regime. Human and property rights are valued and respected. While it is a member of the European Union, the country preserves its monetary independence and boasts one of Europe’s highest levels of economic growth. Its diverse and growing economy is principally based on heavy and light industries, tourism, high-technology and agriculture. The country once hosted a vibrant mining industry, but today its rich deposits of silver, lead and zinc are largely depleted. Local resource extraction is now focused principally on coal, industrial minerals, construction materials and some uranium through recycling and reclamation of mine waste, as well as minor forestry operations. Mineral exploration activity has increased recently, driven largely by a search for battery raw materials such as lithium and cobalt.
Through local laws, regulations and standards, which have been harmonized with those that prevail in the EU, the country has robust environmental regulations and a well-informed and engaged population that cares about the health of its environment and the diversity of its ecosystems. The Czech Republic also has a highly educated, skilled and productive workforce capable of supporting a multitude of technologically advanced industries.
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