Manganese producer Element 25 Limited has tabled a solid set of financials following a recent scoping study for the construction and operation of its planned high purity manganese sulphate monohydrate, or “HPMSM” plant. The financial metrics also show a solid 20-year life for its Butcherbird manganese project in WA that is highly leveraged towards the emerging electric vehicle industry that uses high purity manganese in its lithium-ion batteries.
The company now plans to move directly into a definitive feasibility study, or “DFS”, skipping a pre-feasibility study in order to get its Butcherbird HPMSM downstream processing project into construction sooner with results from the DFS expected in the second half of 2022.
The scoping study points to a healthy net present value of US$439m using a base case of 50,000 tonne per annum of product processed and that number skyrockets to US$1.275b based on an annual throughput of 150,000 tonne per annum of HPMSM. It shows an internal rate of return on the 50,000 tonne per annum base case of 40 percent and the project is expected to spit out annual free cashflows of US$73m at the base case and as much as US$205m a year based on the 150,000 tonne per annum model.
The scoping study analysis used a life of project average HPMSM price of US$1,950 per tonne and a fertiliser grade manganese sulphate price of US$900 per tonne.
The scoping study modelled the capital expenditure outlay based on a plant to be constructed somewhere in southeast Asia. The project will entail three stages of development and is estimated to cost approximately US$150 million including a US$14m contingency and US$24m in working capital.
The base-case assumption for the study utilises test work that shows high recovery rates coming in at an average above 85 per cent.
Over the life of the project, operating costs are estimated to come in at US$552 per tonne of HPMSM equating to just 28 per cent of assumed revenue per tonne. Process optimisation steps will be investigated during the DFS with the goal of confirming assumptions on metallurgical recovery rates and improving metal recovery rates whilst also reducing energy usage.
The scoping study is based on ore being sourced from the company’s existing Butcherbird manganese project that has a JORC compliant proved and probable reserve that comes in at 55 million tonnes grading 10.8 per cent manganese.
Element 25 says it is pleased with the results of the scoping study as it has affirmed its assumptions that a long life, low operating cost opportunity exists with the potential to expand into down stream processing of ore to produce HPMSM. The company says the project requires a very modest capital injection within a stable jurisdiction with simple logistics in a growing market.
Management says it has sufficient funding to contribute supported by strong forecast revenues from its existing production operations in WA and a traditional debt-equity funding solution is on the cards following an offtake agreement finalisation in 2023.
The plant design will be undertaken with a strong focus on environmental and social governance principles including carbon minimisation by sourcing energy from renewable sources where available, a policy that is in line with the company’s net-zero carbon strategy.
The positive scoping study results follow record daily production at Element 25’s Butcherbird manganese project in WA after repair and modification works of its currently producing processing plant were completed.
Daily production throughput at the processing plant smashed the previous daily record on the 3rd of January 2022 when it produced a whopping 1,209 tonnes of concentrate in a single day.
Element 25 already has a solid manganese resource base with an outperforming mill in the tier 1 jurisdiction of WA. The scoping study that appears to show a convincing case for downstream processing of its manganese ore to create HPMSM could add yet another valuable string to the company’s bow.
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By Matt Birney
