Preliminary Feasibility Study Shows American Manganese's Artillery Peak Project to be Economic

May 17, 2012 - Vancouver, British Columbia

Larry W. Reaugh, President and Chief Executive Officer of American Manganese Inc. (“American Manganese” or the “Company”), (TSX.V:  AMY; Pink Sheets:  AMYZF; Frankfurt:  2AM), announces the receipt of the financial model results from the preliminary feasibility study (the Report), prepared by Tetra Tech Wardrop (Tetra Tech), for its 100% owned Artillery Peak Manganese Project (Mohave County, Arizona).  The complete NI 43-101 compliant Technical Report will be filed with the regulators on SEDAR within 45 days of this news release.

A summary from the Report of the pre-tax financial model results is presented below:

The project is most sensitive to the price of electrolytic manganese followed by operating costs and capital costs.

As shown in the Report, the total amount of EMM produced over the life of the mine is estimated to be 994,499 tonnes (about 2.19 billion pounds).  The average unit production cost of the EMM, after credits from by-product and on-site waste steam power generation, is shown below.  The plan incorporates a low waste strip ratio (2.20:1) and higher grade (3.13% Mn) in the first 6 years of operation; followed by the second phase of mining ending in year 10 that has an average grade of 2.68% MN and a waste strip ratio of 2.17:1.

The initial capital cost is estimated at $477 million, and would be mostly spent over the 2 year engineering, procurement and construction period.  The sustaining capital over the contemplated mine life is estimated at approximately $60 million.  Allowances for end of mine life expenditures for waste re-handling, site reclamation, and plant salvage have been made totaling about $47 million.

The Report is based on geological work and drilling performed by the Company under the supervision of N. Tribe & Associates Ltd.  Tetra Tech developed a geological block model for that portion of the deposit located along the northeast flank of Manganese Mesa that is most amenable to surface mining.  The geological block model contains Indicated and Inferred resources estimated as follows:

From this starting point, a mining plan was developed using waste haul back open pit mining techniques.  The open pit has been designed to achieve a mine life of 21 years, and is estimated to contain a Probable Reserve of 45 million tonnes grading 2.46 % Mn.  The average stripping ratio (waste tonnes: ore tonnes) is estimated at 2.46:1.  A unique feature of the design is that most of the waste rock is disposed of within the mined out areas of the open pit as they become safely available; which minimizes land surface disturbance and hauling costs, while facilitating progressive site reclamation.

The mine production schedule is designed to produce about 50,000 tonnes of electrolytic manganese metal (EMM) annually from a processing plant capable of treating 7,000 tonnes of feed per day.  Hydraulic front shovel and rubber-tire front end loading units are matched with 150 tonne mechanical drive haul trucks to provide the back bone of the mining fleet.  Drilling, ancillary and support equipment are allocated to meet the requirements of the production schedule.

Cleaner energy-efficient hydrometallurgical process

The EMM production process uses a reductive leach hydrometallurgical process developed and tested by Kemetco Research Inc. (patent pending by American Manganese Inc.), and manganese metal specific electro-winning technology.  The resulting tailing would be co-disposed with the waste rock within the mined out areas of the open pit mine. 

The Report is based on the results from continuous pilot plant testing program performed by Kemetco Research Inc., and its specialist subcontractors, during the last half of 2011 and the first quarter of 2012.  Using its experience and a proprietary in-house process simulation computer program, Tetra Tech scaled-up the test data to the desired commercial size plant for design and cost estimating purposes. 

Re-use of process water

Surface disturbances for the contemplated mining and processing operations are limited to a single drainage.  Surface water is diverted around the disturbed areas; while process water and water accumulated within disturbed areas is collected, re-used, and not allowed to enter the undisturbed watershed.

From the mine design, process design and layout, and site restoration philosophy Tetra Tech has prepared capital and operating cost estimates for the planned development.  These estimates were prepared in accordance with good engineering practice and accurately reflect the level of preliminary feasibility study.

CPM Group prepared a market study (follow this link to review CPM Summary), including an EMM price forecast which is being used in the Report.  Quoting from the CPM Group study:  “Over the next 10 years real electrolytic manganese metal prices are forecast to average $1.92 per pound, reaching an annual high of $2.30 in 2021.”  The study also provides up-side and down-side EMM price scenarios which have also been used in the Report.

“We believe that we have received excellent work from all of our consultants.  The project design capitalizes on a much better understanding of the character, controls and distribution of the mineralization, maximizing the overall utilization of the manganese resource within the contemplated mining area,” says Mr. Larry Reaugh.  “The combined work produced solid representation of the commercial opportunity offered by developing the manganese deposits at Artillery Peak in the current rapidly escalating capital and operating cost environment.  The Artillery Peak EMM production cost is estimated to be much lower than published Chinese production costs.  Under the CPM Group pricing scenarios used for the Report, the Artillery Peak Manganese Project is economically attractive.  The technical aspects for mining and processing for the contemplated project have been thoroughly addressed and significantly de-risked.  What risk remains is mostly attributable to the economic climate, or metal market, which is typical for any natural resource opportunity.  This risk would affect all competitive manganese producers and developers equally.  As such, American Manganese strives to become a low cost producer with a sustainable economic advantage over the competition.”

“Further metallurgical testing and engineering work necessary to advance the Project to the feasibility level will focus on process optimization opportunities that could significantly reduce the capital and operating costs, particularly in the liquid-solid separation, sodium sulfate production process areas, more efficient use of thermal steam from the sulfur burner, and construction materials for tanks and equipment.  These opportunities were identified during the course of the Preliminary Feasibility Study and provide a clear path for the next phase of work.  We will also explore and incorporate ideas and technologies that could lead to the production of products suitable for use in the emerging rechargeable electric battery market.”

“I am pleased with the overall results and look forward to advancing the Project to the feasibility level, leading eventually to a positive project development decision,” concludes Mr. Reaugh.

The following qualified persons have prepared the Report and reviewed this news release pursuant to National Instrument 43-101: 

·        Dr. Jianhui (John) Huang, P.Eng. – QP, Process (Tetra Tech)

·        Dr. Sabry Abdel Hafez, P.Eng. – QP, Economic Analysis (Tetra Tech)

·        Dr. Anoush Ebrahimi, P.Eng. – QP, Mining (Tetra Tech)

·        Norman Chow, P.Eng., (Kemetco);

·        Norman Tribe, P.Eng., (N. Tribe & Associates Ltd.)

Investors and media are invited to join American Manganese in a press conference on Friday, May 18, 2012 at 10:00am PST to discuss the preliminary feasibility study.  The press conference will include a PowerPoint presentation.  Participants are welcome to join by phone, computer or both. To join the meeting from your computer or mobile device, enter this URL into your browser: https://www.fuzemeeting.com/fuze/d365cc20/16511697  Dial-in Number to join the audio portion of this meeting: +1 646-583-7415, Attendee Pin Number: 36844224

About Tetra Tech

Tetra Tech is a leading provider of consulting, engineering, program management, construction, and technical services.  The Company supports government and commercial clients by providing innovative solutions to complex problems focused on water, environment, energy, infrastructure, and natural resources.  The company has been servicing the mining industry for more than 40 years and has established a reputation for successfully executing NI 43-101 compliant feasibility studies that meet the scrutiny of the international financing community.  With more than 13,000 employees worldwide, Tetra Tech’s capabilities span the entire project life cycle.  In addition to offices in Canada, the company has more than 330 offices worldwide, including locations in Arizona and Nevada in close proximity to the Artillery Peak project.

About Kemetco Research Inc.

Kemetco Research is a privately owned contract Research and Development Company specializing in extractive metallurgy, chemical processing and specialty chemical analysis.  Kemetco was formed after the acquisition of the Industrial Process Division of BC Research.  BC Research had been in operation for over 60 years as an R&D contractor in British Columbia, Canada.

About CPM Group (www.cpmgroup.com)

CPM Group is the world's premier commodities research and consulting company.  The firm’s primary focus is on precious, industrial, and specialty metals, in addition to undertaking research and analysis across all commodities markets.  In the ferroalloy industry CPM Group has developed a top-rated expertise in molybdenum, vanadium, manganese and chromium, as well as other minor metals.  CPM Group provides a suite of research and consulting services related to the financial management of commodities exposure, including fundamental market research and analysis, consulting and advisory services, commodities management and asset management services, and corporate finance advisory.  Founded in 1986, CPM Group is known for its research and analysis of the metals markets, its overall economic analysis of commodities markets, and its expertise in financial engineering, using derivatives to structure optimized positions for commercial hedgers and institutional and high net worth individual investors.

About Manganese

China controls electrolytic manganese production supplying and producing 98% of the world's needs (3 billion pounds per year).

There is no substitute for manganese in steel (total manganese market greater than 33 billion pounds per year, fourth largest traded metal).

Manganese is a critical metal at risk for supply disruptions in the United States as there is no U.S. production. EMM's greatest uses are the upgrading of specialty steel (74%), and the manufacture of aluminum alloys (12%), electronics (2%), and other applications (12%).

Electrolytic manganese dioxide (EMD) for the battery industry is expected to be the fastest-growing segment of the manganese market.  Ford Motors predicts production of hybrid electric vehicles will account for 25% of its entire vehicle line-up by 2020, and Hyundai has committed a lifetime guarantee to their hybrid electric vehicles that use lithium ion batteries with manganese spinel.

China has a 20% export duty on EMM and the U.S. has a 14% import duty.

The current world price for electrolytic manganese metal is about $1.46 per pound, while the U.S. price is about $1.66 per pound.

About American Manganese Inc.

American Manganese Inc. is a diversified specialty and critical metal Company focusing on potentially becoming a producer of electrolytic manganese metal from its Arizona Manganese Project.

On behalf of Management

AMERICAN MANGANESE INC.

Larry W. Reaugh
President and Chief Executive Officer

Information Contacts:

Larry W. Reaugh
President and Chief Executive Officer
604-531-9639

Connie Fischer
Investor Relations
604-531-9639 ext. 110
Email:  connieir@amymn.com or info@amymn.com
 

www.americanmanganeseinc.com

Cautionary Notice:  The Reader is cautioned that the full Cautionary Notice is not attached to this email.  The reader is requested to access the news release on the Company’s website at www.americanmanganeseinc.com or at SEDAR at www.sedar.com to read the full Cautionary Notice.  The full Cautionary Notice is not attached as the recipient’s spam filters frequently block receiving emails containing the full Cautionary Notice.