Euro Manganese – Czeching out what could be a valuable recycling play

Euro Manganese (ASX:EMN)

Usually when we’re looking at resources-related projects here at Stocks Down Under, we’re talking about mines where the operators just dig ore out of the ground and perform a few early value-adding steps before shipping. That’s not Euro Manganese, ASX/TSX-V: EMN. This Vancouver-based company’s flagship project is based on a mine that was exhausted way back in 1975, the Chvaletice Pyrite and Manganese Mine in what is now the Czech Republic. Euro Manganese intends to reprocess the tailings from that mine into high-purity manganese products to be used in rechargeable batteries. It’s a recycling play, not a mining play.

Playing right into the EU’s Critical Raw Materials Act

If it works, the shareholders of Euro Manganese stand to make out like bandits. For one thing, even the tailings from Chvaletice make the company the proud owner of the only sizeable defined manganese resource in the European Union. That’s important given Europe’s ambitions to control as much of its critical mineral needs as possible, which includes Element Number 25 (manganese). Last year the EU passed its Critical Raw Materials Act, aiming to streamline permitting processes for critical minerals from years to months. In March 2025, Chvaletice was designated a Strategic Project under that Act.

Importantly, the economics of Chvaletice are highly favourable. A mid-2022 Feasibility Study gave the project an after tax NPV of US$1.34bn and an after-tax Internal Rate of Return of 22%, using an 8% discount rate. All that needs to happen to unlock that 25-year project life bonanza is for Euro Manganese to find the US$757m in pre-production capital costs to make the project happen. Given what’s happening in the world of batteries, we reckon the project has a good chance of finding that capital.

Czech this out

Chvaletice – pronounced ‘k-h-vah-leh-tee-tseh’ – is about 90 km east of the Czech capital of Prague. The Czech Republic is a great place to be developing a project like Chvaletice. An EU member since 2004, the Czech Republic is now the 20^th most free economy in the world according to America’s Heritage Foundation, with high scores across most measures of economic freedom with the notable exception of labour freedom, but even there the lag is only slight, so that the ability to hire and fire is about the same as Belgium or Israel. Taxes in the Czech Republic are low, with the top corporate tax rate only 23%. The cost of living is about 20% lower than in the Czech Republic’s next door neighbour, Germany. And the centre-right government of Prime Minister Petr Fiala, in office since late 2021, is business and mining friendly. Fiala’s government was happy to grant Chvaletice ‘Strategic Deposit’ status back in March, in lockstep with Brussels.

And then there’s the location. Europe is moving fast to put up gigafactories that will satisfy growing demand for Electric Vehicles. Well over 30 of them are expected to be operational by the end of the decade, and many will go up in Germany. The massive Gigafactory Berlin-Brandenburg, Tesla’s first manufacturing location in Europe, is only around four hours’ drive from Prague while VW’s Salzgitter plant in Lower Saxony, intended to become a battery hub for the VW Group, takes about five hours.

Check out our recent interview with CEO Martina Blahova

Not all manganese is created equal

When most Australian investors think manganese, they likely think the kind of product shipped from South32’s Groote Eylandt mine in the Northern Territory, which is a high grade manganese concentrate shipped to steel mills for use in alloys that harness manganese’s ability to increase the strength and hardness of steel. The benchmark here is 38% manganese concentrate, which currently gets you around US$4.10 a tonne in Shanghai.

Chvaletice’s products are a completely different ball game. Euro Manganese wants to make a High Purity Manganese Sulphate Monohydrate, or HPMSM, and sell it for US$4,000 a tonne, as well as HPEMM, or High Purity Electrolytic Manganese Metal, selling that at US$10,000 a tonne. HPEMM is 99.9% pure manganese that has been ‘electrowon’ from a beneficiated manganese concentrate that has gone through a few leaching and purification steps.

HPMSM is a 32% manganese powder that can be used to make manganese alloys. The US$10,000 product is where a lot of the action will be at in the future, because that’s battery grade material. At the moment, just about all of that comes from China. With or without non-Chinese production, the global market is expected to be in deficit by 2027.

A key battery material

Manganese is getting set to enjoy a long and productive future as a battery metal. For a long time now, developers of rechargeable batteries have been trying to figure out what kind of material to put in the cathode to maximise energy density and therefore battery range while also keeping the battery stable. For lithium-ion batteries, the standard has become NMC, that is, a combination of nickel, manganese and cobalt. There are various types of NMC cathodes out there such as NMC 111 and NMC 622, with the numbers indicating the relative proportions of each metal. Broadly speaking, more nickel equals more energy density, and more manganese equals more thermal stability, making it less likely the battery will catch on fire.

Manganese has a big advantage in the battery chemistry game – its cost. The halcyon days of cobalt at US$75,000 a tonne may be long gone, but even in a weak period like now, at about US$30,000 per tonne, it’s expensive. So battery developers are working to cut the amount of cobalt they need, in the process dispending with the need to buy from gangster’s paradises, like the DRC.

The battery makers won’t be cutting manganese because it’s only about 1% of the typical cost of a battery. What’s encouraging about the battery scene as far as producers of manganese are concerned is that the metal features in most forecasts of future use. GM is pushing lithium manganese-rich (LMR) batteries and that company, working with LG Energy Solution, now has a new LMR battery that has 33% higher energy density compared to the best-performing lithium iron phosphate (LFP) based cells, at a comparable cost. Other future chemistries, like lithium manganese iron phosphate (LMIP) and lithium manganese nickel oxide (LMNO), are also being talked about.

Getting its funding ducks in a row

Currently, investors can pick up Euro Manganese stock on either ASX on the TSX-V for a fraction of its potential payday. The market capitalisation is only A$27m after a recent A$12m placement at C$0.18 (A$0.20) that saw the legendary Canadian resources investor Eric Sprott as well as the European Bank for Reconstruction and Development (EBRD) participate. The story they are backing may seem like a long shot, but there’s a path to value creation here.

Euro Manganese is currently working on getting offtake for Chvaletice, having recently commissioned a demonstration plant to produce sample material. There are now five executed offtake term sheets, the most recent signed earlier this month. The company is betting that offtakes can then help accelerate discussions on financing of the project, which are ongoing. Orion Resource Partners, a New York asset management firm focused on natural resources, put forward a US$100m funding package in 2023, which got the funding ball rolling. Euro Manganese believes it can potentially be at a Final Investment Decision by 2027.

The fact that the EBRD is involved is important – that multilateral developmental investment bank started life, you’ll recall, in the early 1990s with a mandate to help convert Eastern Europe over to capitalism, so it knows the Czech economy well. It has been part of the Chvaletice story since late 2021 when it took a share placement to fund the demonstration plant.

Yeah, we get it, battery minerals are still out of favour. However, we argue, recycling stories with good economics are still getting a hearing in the current market. So this one could be worth checking out. Or maybe we should say, ‘Czeching out’…

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