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Charting a growth path for a w
ELEME
world class manganese business
ENT 25
MINING | ELEMENT 25
Manganese is the twelfth most abundant element on the Earth’s crust and the fourth most traded metal globally, owing to its role as a critical raw material in multiple industries. By far the biggest consumer of manganese is the steel manufacturing sector, which accounts for around 90% of current demand. The remaining 10% goes into the production of high purity products, including electrolytic manganese metal, electrolytic manganese dioxide and manganese sulphate, which are most notably used in the manufacture of highperformance lithium-ion batteries. While this nascent segment of the market is comparatively smaller than steel at the moment, there is an expectation that as electric vehicles (EVs) and battery storage become an increasingly important part of the global energy solution, demand for high purity manganese chemicals will grow exponentially, according to Element 25 managing director Justin Brown. “We are working on both segments and are going to start by producing a product suited for steel manufacturing, but we’re also rapidly developing plans to produce battery grade chemical manganese products as well, around which quite a lot of the flowsheet development has already been done,” he says.
Listed on the ASX since 2006,
chemical manganese products,
Element 25 has traditionally
which yielded a breakthrough
been a diversified explorer
in 2019. “In the process of
with experience in gold, copper
developing the flow sheet
and nickel projects before it
for the high purity stuff, we
discovered the Butcherbird
identified the potential to
Manganese Deposit in Western
produce an intermediate
Australia (WA). To demonstrate
concentrate product that we
a singular focus on the project,
can then ship to the steel
the company changed its name
markets for much reduced
to correspond with the atomic
capital costs, which will help to
number of manganese – hence
drive business growth through
Element 25.
early cash flows.
In addition to lodging a mining
“Now we have all our approvals,
lease application for the
we’re financed, offtakes are
Butcherbird project - located in
in place and we expect to be
the Southern Pilbara region of
producing our first manganese
WA - in February 2018, Element
concentrate product in Q1 of
25 carried out a sustained
2021, so it has been quite a
programme of drilling out
journey in a short period of
the resource for what is now
time.”
defined as the largest onshore with >260 million tonnes (Mt)
Attractive project attributes
of manganese ore in measured,
While WA was ranked the
indicated and inferred JORC
best jurisdiction in the world
resources.
for mining projects by the
manganese deposit in Australia,
2019 Fraser Institute Annual Over the last 24 months,
Survey of Mining Companies, a
the company focused on
common challenge for project
developing a flowsheet for
developers in the region has
the production of high purity
been inadequate infrastructure
MINING | ELEMENT 25
in some of the more remote
produce high purity chemical
regions of the vast state.
manganese products.
But Element 25 is fortunate
“The deposit itself will be
in that its project is located
very easy to mine because the
in close proximity to a gas
geology is simple. It’s a bulk
STOCK TICKER
pipeline and a bitumen
mining exercise so there’s no
ASX:E25
highway that leads all the way
need for explosives, there are
MARKET CAPITALISATION
to Port Hedland – where the
very low levels of deleterious
company will ship its product
elements and the beneficiation
from. While the gas pipeline
process is simple. It’s low cost
won’t be used for the stage 1
and from an infrastructure
development, having access
point of view, it’s very well
to one is a vital pre-requisite
positioned.”
E L EM E N T 25 AT A G L A N C E
A$209.56 million (as of January 08, 2021)
ajbr
for the company’s plans to
MINING | ELEMENT 25
At the start of December 2020, Element 25 published an updated pre-feasibility study (PFS) which included significantly improved economic metrics for the base case, while adding expansion option study results. The initial base case PFS published in May 2020 identified an opportunity for a low capex, rapid startup operation exporting manganese concentrate with a nominal pre-tax NPV of A$441 million and IRR of 255% for a 42-year mine life. However in the revised study, the company estimated the base case pre-tax NPV at $583 million with a higher IRR of 387%. “We increased the nameplate throughput of the plant, which improves economics. We also identified some interesting impurity attributes of the ore that are attractive to the market, which will allow us to improve the pricing model and we’ve JUSTIN BROWN, ELEMENT 25 MANAGING DIRECTOR
reduced our operating costs,”
$1,138 million for a 15-year
than an explorer is a fantastic
Brown adds.
period.
milestone for the company.”
Expansion plans
These eye-watering numbers
What’s more, the cashflow
In addition, the metrics for the
for the expansion cases have
generated from the first stage
expansion cases 2 and 3 are
been calculated in line with
of production will directly
even more attractive. The pre-
the company’s longer-term
contribute to the funding of
tax NPV for the expansion Case plan to build a high purity
the expansion stages of the
2 is estimated at $926 million
manganese sulphate plant
project. The base case uses
for a 20-year mine life, while
for the production of battery
only 20% of the resource,
expansion Case 3 will generate
grade manganese chemicals.
so expansion is inevitable,
“Ultimately, we will move past the concentrate export business into the lucrative high purity battery grade chemical manganese segment to feed the growing demand from the world’s transition to electric vehicles.” Justin Brown, Element 25 managing director
according to Brown. But, choosing to keep his feet rooted firmly on the
“The critical thing for us was
ground, Brown is quick to
to get a low capex Stage 1
acknowledge the remarkable
opportunity up and running
achievement of the Element 25
and then we can leverage off
team ahead of the imminent
the cash to drive stages 2, 3
commissioning of Stage 1 of
and beyond.
the Butcherbird project. “Ultimately, we will move “We’re about to deliver a
past the concentrate export
mining project in WA much
business into the lucrative high
faster than anyone else has
purity battery grade chemical
done in the past,” he says.
manganese segment to feed the growing demand from the
“It’s often a five-year journey to develop a project of this type.
world’s transition to EVs.”
12 months if we can hit our
Obtaining offtake
target. Becoming a revenue
Being a relatively unproven
generating producer rather
player in the manganese
We’ve done it in a little over
market as a whole, securing
MINING | ELEMENT 25
reliable offtake customers
surprise at the appetite
demand side looks really good
for its manganese products
for Element 25’s products,
at the moment.”
has been a key mission for
including beyond Stage 1.
Element 25, and a successful one at that.
Demand for high purity Element 25 also recently
battery metals has been
agreed non-binding offtake
buoyed recently by a wave of
The company has secured a
terms with Singapore-based
policy commitments centred
five-year take-or-pay offtake
Semeru Energy for 50% of the
on the decarbonisation of key
agreement with ASX-listed
production from the Stage 2
industries in major economies
OM Holdings for 100% of its
expansion to a maximum of
around the world.
first phase of production, up
200,000 tonnes per annum.
to 365,000 tonnes per annum
“We are seeing further pent-
The electrification of vehicles
of manganese concentrate.
up demand for offtake from
is a major part of plans for
Brown recounts his pleasant
stages 2, 3 and beyond, so the
a global ‘green industrial revolution’, with Tesla the
MINING | ELEMENT 25
runaway leader in the EV
higher manganese content
Japan, Korea, North America
market. During its highly
in EV batteries will also play
and Europe. A non-China
anticipated Battery Day in
perfectly into the hands of
dependent diversified supply
September, the technology
Element 25, with its long-life
chain is going to be really
behemoth announced a new
project located in the ‘safe as
important to us.”
nickel-manganese cathode for
houses’ jurisdiction of WA. “Traditionally, Western
Limitless growth potential
This, along with the fact that
Australian producers have
Element 25 is on the brink of
several competing automakers
relied on China as the end
delivering the first phase of its
are set to follow suit, bodes
point for their commodities,
large-scale Butcherbird project
incredibly well for manganese
but I think that’s evolving.
in WA. First production of
chemicals demand going
We can see opportunities in
manganese concentrate for the
forward, according to Brown.
supply chains that stretch
export market in Q1 will drive
A synchronised shift towards
from Butcherbird to Malaysia,
the company into positive
higher end vehicles.
MINING | ELEMENT 25
revenue territory for the first time since the company’s inception. This fast-approaching milestone has been well received by the markets, but this is only just the beginning for Element 25, with expansion cases geared towards high purity manganese chemical production showing NPVs and IRRs far in excess of the base case. “From 2023 onwards, you’ll
“Now we have all our approvals, we’re financed, offtakes are in place and we expect to be producing our first manganese concentrate product in Q1 of 2021, so it has been quite a journey in a short period of time.”
see that hockey stick growth
“With a 260 Mt resource
curve that everyone talks
we’ve got huge potential to
about really take off for battery
expand. There are amazing
chemicals,” Brown predicts.
metrics on the base case and
“We are positioning Element
the expansion cases as well.
25 and Butcherbird to take full
Beyond that, there is almost
advantage of that.
limitless growth potential.”
“Having a project that can deliver into the supply chain for locally produced batteries in WA is going to be really exciting, but I think these megafactories under construction in Europe, Asia and North America are going to be really important customers as well.
Published by Anderson Murray Media Ltd
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