📋  What does Euro Manganese do?
Euro Manganese (ASX:EMN) is developing a High Purity Manganese project in the European Union (Czech Republic) through the recycling of a tailings resource from a historical mine site.
🌏  Macro Themes
Manganese is a key input for EV batteries and European nations are adopting pro EV policies with the ultimate aim of phasing out fossil fuel powered vehicles by 2035. 

The EU region currently accounts for ~45% of all EV sales. With the size of the global EV fleet expected to grow from 11 million now to ~145 million in 2030, we expect domestic demand for battery metals  like manganese to increase exponentially.
Why do we continue to hold EMN in 2022/2023?

Unique exposure to High Purity Manganese: Increasing demand is not being met with increasing supply because the demand outlook is less clear in the short-term. However we have made our investment ahead of time, anticipating exponentially higher demand in the future. EMN has five MOU’s signed to supply customers with product as part of the supply-chain qualification process. These, if successful, could form the basis for long-term off-take agreements.
Strategically located: EMN is strategically located in the heart of Europe, where over 25 EV plants and 30 battery plants will soon be operating. High Purity Manganese is a key raw-material in their supply chain. With VW and Daimler committing to EUR$34/EUR$60B+ in investments over the next 5-10 years into their battery metals supply-chain, EMN may benefit from the increased domestic demand.

New CEO – Appointed in December 2021 – we are looking forward to what Dr. Matthew James can accomplish for EMN in 2022/2023. Dr. James is particularly skilled at getting major mining projects operational having helped Lynas raise over A$1 billion of equity and debt funding between 2002 and 2011.

Click here to see a deep-dive on why we first invested in EMN. 
What do we want to see from EMN in the next 12 months?
Objective #1: Construction of the Demonstration Plant

EMN has designed a Demonstration Plant to produce large-scale samples of High Purity Manganese products. The plant will enable the company to show potential off-take partners they have production capabilities & a commercially viable product. Commissioning of the plant is now expected in September 2022.

🔄 Receive final shipment of Demonstration Plant Parts (July 2022)

🔲 Commision Demonstration Plant (September 2022)

🔲 First delivery of samples to customers (Q4 2022)

Objective #2: Definitive Feasibility Study (DFS)

The DFS will give an updated look at EMN’s project economics & assist with the financing process going into a final investment decision. Expected in the second half of 2022.

🔄 Delivery of Definitive Feasibility Study (late Q2 – early Q3 2022)

Objective #3: First Offtake Partner

Large scale samples of High Purity Manganese need to be assessed for quality by end users who then sign an offtake agreement for future supply – an offtake agreement would be a major achievement for EMN in 2022.

🔲 First offtake partner (Q3 2022?)

🔲 Bonus: second offtake partner (Q1-Q2 2023?)

Objective #4: Early Progress on Project Financing

With a new CEO at EMN that is skilled in financing resource development projects, it would be a win to see some early progress on 2023 financing goals come from these offtake agreements.

🔲 New institutional investor/further institutional investment

🔲 Debt or equity financing agreement
What could go wrong?

Product risk – EMN’s Demonstration Plant is unable to produce qualified, commercially viable High-Purity Manganese products that are of interest to potential customers.
Development risk – Tailings recycling projects inherently have a lower-grade ore versus conventional deposits, which can impact the project’s economics, sometimes making it non-viable to operate a tailings mine. Additionally, development of the project also hinges on successful processing of manganese tailings and scaling that operation to produce economic quantities of the product.  
Regulatory / permitting risks – Every mine needs a social licence to operate and there are risks associated with any new mining development. 
Market risk – There’s a risk that manganese prices decrease and a tailings resource is not seen as attractive to investors, or there is a general market collapse/financial crisis.
Financing risk – Due to a combination of any or all of the above risks, financing for the project is hard to come by or unavailable, and the project does not become operational.

What is our investment plan?
We invested in EMN at 6.5¢, 20¢ and 60¢. We have held EMN shares for over 21 months now and have free carried and taken some profit. We continue to hold 1,733,000 shares of EMN.

We are very interested to see if the new CEO can increase the pace at which the 2022/2023 objectives are achieved.

During the next 12 months if some of the key objectives are achieved and the share price re-rates we will aim to sell about 20% of our position to take some profit. Our long term aim is to hold a position into first production in 2025.

Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 1,733,000 EMN shares at the time of publication. S3 Consortium Pty Ltd has been engaged by EMN to share our commentary on the progress of our investment in EMN over time. 

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquiries as to the validity of any information in this article.

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Investment Milestones for EMN
✅ Initial Investment: @6.5c
✅ Top Slice
✅ Free Carry
✅ Increase Investment: @20c
✅ Free Carry
✅ Increase Investment: @60c
✅ Free Carry
✅ Take Profit
✅ Price increases 300% from initial entry
✅ Price increases 500% from initial entry
✅ Price increases 1000% from initial entry
✅ 12 Month Capital Gain Discount
🔲 Hold remaining Position for next 2+ years

“Company Milestones” are based on the company’s publicly available execution plan and some assumptions made by our team on potential announcements that should de-risk the investment. “Our investment milestones” show our current long-term investment plan. Early stage investments are risky and there is no guarantee that the expected events will occur. The lists are not in sequential order.

Key
🔲 Expected Milestone
✅ Achieved Milestone
🟥 Negative Result
🌎 Macro Event

Disclosure: The authors of this article and owners of Wise-Owl, S3 Consortium Pty Ltd, and associated entities, own 1,733,000 EMN shares at the time of publication. S3 Consortium Pty Ltd has been engaged by EMN to share our commentary on the progress of our investment in EMN over time.