Element 25 is making inroads into the more exotic and less well-known ingredients that make up emerging battery chemistry. Namely, manganese with their developing Butcherbird project in Western Australia.
We interviewed the company’s Managing Director, Justin Brown, and discovered an innovative approach to both powering the project and new processing methods for a unique ore body.
NEW-ENERGY RESOURCES [NER] You are looking to develop the Butcherbird manganese project in a northern part of Western Australia and currently working on the pre-feasibility study. The scoping study was completed in May 2018 but, since then, you've announced quite a significant resource upgrade. I think it's fair to say that everybody's understanding of the battery-grade manganese market has now increased substantially. What's going to be in the PFS that wasn't in the scoping study? JUSTIN BROWN I think the PFS will reflect our deeper understanding of the metallurgy of the process; we've done a whole lot more metallurgical test work. On top of that, we've completed a significant amount of engineering design and conducted investigations into the correct power solution for the project. So, the predominant addition has been the level of detail.
A scoping study only takes half a dozen assumptions and wraps some economics around that. The PFS will seek to flesh out those areas of interest in far more detail, understand the key sensitivities of the project and what's required to get it up. NER What’s the updated resource compared to the previous one? JUSTIN BROWN We've increased that by a significant chunk to about 263 million tonnes of manganese ore, containing approximately 26 million tonnes of manganese metal or manganese equivalent. That's around a 30% increase in the overall global resource. So it's a considerable manganese resource and one which will underpin an extensive mine life for the project. NER What's the scope of the project that you're envisaging in terms of size? JUSTIN BROWN Interestingly, most resource projects are constrained by resource. Ours does not face that limitation. The question for us is what is the minimum economic module size we can get up and running before we look to grow aggressively so as to take advantage of our massive resource size?
We currently have a base case of about 100,000 tonnes of manganese metal production. If we operate at that level, then our current resource base potentially provides a mine life in excess of 100 years. Our base case will be 50 years - the reason being, beyond 50 years is somewhat meaningless from an economic perspective. It's by no means a reflection of the limits of the resource, which will carry us forward for decades to come.
The CapEx is not yet defined. We're now in the final stages of the first round of CapEx estimation, which will be delivered as part of the pre-feasibility study. NER Can you discuss the mineralogy of the manganese minerals in the ore body? JUSTIN BROWN Indeed, it's a little bit different. There's a group of manganese mines in South Africa that are the main global producers of manganese ore. There's also a different type of manganese ore in China, a carbonate ore, different to the South African ores. Then we've got a different suite of minerals as well. That makes our ore body unique and amenable to the specific production pathway we're envisaging for this project. NER So, the processing pathway that you've developed, what does it entail? We believe it's been developed as part of a joint venture with CSIRO? JUSTIN BROWN Not exactly a joint venture, but certainly a process they’ve helped and supported us with.
We were faced with a critical question - what is the best way to process this material? We received some government grant funding to investigate the problem. CSIRO were integral in helping us to unlock the value proposition of this project whereby we can now use a new, low-temperature, low-pressure, very rapid leach to extract the manganese in solution. Different to ore bodies elsewhere around the world.
It’s one of our key competitive advantages which has allowed us to pursue this high-value product pathway in terms of producing manganese metal and battery-grade manganese sulfate.
This was the key to unlocking the value and potential of Butcherbird. NER Within that study, you've noted that the process is energy intensive. Given that energy costs in Western Australia are not the lowest ones out there, what are you planning to do to reduce the energy costs for the business? JUSTIN BROWN It's a great question and it's one that has been a feature of our investigation. When we first considered commercialising Butcherbird using electrolytic process, you're right - one of the first things that leaped out at us was the large amount of electricity required.
We have the good fortune of a natural gas pipeline running straight through the project: it literally sits on top of our ore body. So, we had excellent access to a relatively cheap, base-case power supply through gas generation. Gas prices in WA are relatively cheap compared to elsewhere, so that was a big tick. Since then, we’ve investigated how can we improve on that. We’ve discovered that the cost of installing renewable generation in Australia, particularly on long-term contracts, (in our case, say, a 20- or 25-year contract), we can bring power costs down significantly below a gas-only, base case.
In fact, we believe we can get extremely close to parity with competitors like China. We're confident we're very close to cracking the power problem, which will be one of the key pillars of this project. NER Fantastic and you'll be using battery storage as well which always gets our approval! Onto the market for battery-grade manganese chemicals - what's the demand like now? What are you expecting it to be over the next four or five years with the growth in NCM batteries? JUSTIN BROWN That's a crystal ball question! The world's already seen huge growth in demand for these chemicals, but off a very low base. If you go back a few years, the demand for these battery minerals was limited, manganese included, but we're now seeing a high-teens percentage growth year on year.
The expectation when you talk to most people is that the explosion, if you like, will happen around 2024–2025, where this hockey-stick curve might really kick in.
Right now, manganese sulfate has a market of probably around 140,000 tonnes per annum globally. However, we may see a 10-fold increase in that over the next five to 10 years.
We're talking about very steep growth curves and steep demand growth, which bodes well for pricing. If you're well positioned to supply into that market, you should reap the benefits. NER What sort of purity levels are required for the manganese sulfate going into battery applications? JUSTIN BROWN It depends upon the end-users and their specific type of battery however, in general, the purity needs to be very high. In the case of manganese sulfate, you're talking 99-plus percent pure, but it's not necessarily the absolute purity that's the most critical factor.
Batteries are incredibly sensitive to specific impurities. Iron is a no-no - you can only have extremely low levels of iron. Some of the other metals like copper and zinc are similar, yet other impurities are less sensitive.
It's a case-by-case situation dependent upon the end-user's requirements. NER You've conducted and reported a fair amount of metallurgical test work. Will you be building a pilot plant or a demonstration plant for this project? JUSTIN BROWN We will. One of the next key phases of work is to do just that: we have proposals and budgets in place for that process. Following the conclusion of the PFS, we will look to move onto that phase of work. It will involve a lab-scale pilot, which will be a continuous operation pilot plant, and that will be the final piece of the puzzle in terms of demonstrating the robustness of the metallurgical process that we intend to implement at Butcherbird.
NER What timeline are you looking at for PFS, feasibility study and next catalyst for the market?
JUSTIN BROWN The pilot plant is a key element. That will then set in stone the engineering design parameters, which will go into a definitive feasibility study in the first half of this year. We would like to think that by the middle of this year we will be close to completion of the DFS.
Obviously there's a project financing thread and power provider tender process that have to happen in parallel to that. In a perfect world, we'd like to think we'd be in a position to make a final investment decision towards the end of 2020, and probably around about a two-year construction period before we produce. Late 2022, if all goes to plan. NER How much cash do you have at the moment, and how much do you think you're going to need to get the PFS published and out into the market? JUSTIN BROWN If you look at our most recent quarterly, we've got in the order of $8 million in cash and investments available, so the balance sheet is reasonably robust. We were comfortably funded to complete the PFS and the piloting. Post that, we'll need to look at sources of funding to carry us through the DFS. But for the next quarter or two, we're pretty comfortably funded. NER Wonderful - that's a significant differentiating factor in the market at the moment.
Based on your ongoing discussions with investors, what's the most important thing that investors don't really grasp about the project that you most want to communicate? JUSTIN BROWN
I think many investors are acclimatised to the traditional metals: copper, zinc, gold, iron ore, etc. I think manganese is one that is not well understood, but it's one that is facing some fascinating market dynamics, both from the battery space but also from traditional supply–demand fundamentals. These high-purity products have been dominated by China over the last several decades but China's advantages are being eroded by a number of factors, including depletion of their local manganese ore. So there's a really good opportunity for players outside of China to move into this space.
We talk to steel makers and battery makers in Korea, Japan, North America and Europe. They're all exceptionally keen to see supply from outside of China, to offset some of the risks that go with that trade, and they're welcoming us with open arms.
We think the product, if we can make it, will be easily sold to bankable off-take counterparties, and I think it's a growth market.
So for investors that are looking for something a little bit different with sound fundamentals and exposure to the battery sector, then I reckon you should take a closer look.