Euro Manganese Inc (ASX:EMN) (CVE:EMN) (OTCMKTS:EUMNF) (FRA:E06) will purchase and extinguish an aggregate 1.2% royalty interest in its flagship Chvaletice Manganese Project in a move that will boost project economics.
The 1.2% net smelter royalty was granted when Euro Manganese acquired the Chvaletice project in the Czech Republic back in May 2016 from three arm’s-length parties.
By buying back the royalty and extinguishing it, Euro expects Chvaletice’s after-tax net present value (NPV) to increase by US$25.3 million, while eliminating US$91.1 million in expenditures over the project’s 25-year life and reduce operating costs by US$3.40 per tonne of plant feed.
The expected benefits of the deal are based on a preliminary economic assessment completed in 2019.
Royalty purchase a no-brainer
Euro Manganese CEO Marco Romero said the buyback of the net smelter royalties would unlock further value in Chvaletice.
“Based on the 2019 preliminary economic assessment results and assumptions, this royalty buy-out enhances the project’s economics, and the payment terms allow the Company substantial financial flexibility,” he said.
“We continue to evaluate other potential value-enhancing opportunities for the project.”
Chvaletice as it stands
EMN is making strong progress with pre-development activities at Chvaletice following the closing of the second tranche of an oversubscribed private placement of A$30 million earlier this month.
The project is designed to produce high-purity manganese products by reprocessing manganese-rich tailings from a decommissioned mine, 90 kilometres east of Prague in the Czech Republic at the heart of Europe.
EMN remains on track with the permitting process, demonstration plant, feasibility study and commercial negotiations.
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.
Terms of buyback
Euro will pay the former holders of the royalty US$900,000 in cash, with the remaining 80% to be paid either all in cash or in a combination of cash and up to 50% in common EMN shares.
– Daniel Paproth