Barry FitzGerald: Firebird heads downstream to take on China at the manganese chemical game

“Garimpeiro” columnist Barry FitzGerald has covered the resources industry for 35 years. Now he’s sharing the benefits of his experience with Stockhead readers.

Garimpeiro normally focuses on the “upstream” part of the mining and exploration industry looking for where value could be created with the drill bit. A sort of dig it up and ship it out sort of focus.

But today he broadens his horizon to take a look at the “downstream” sector where ores and concentrates are transformed into higher value products using minerals processing technologies.

It is an area that has come under the spotlight  of investors as the non-China world gets busy building out its own supply chain of processed metals and minerals critical to the modern way of life.

That is reflected in the rise of interest in ASX-listed stocks with a value-add/security of supply minerals processing technology bent. They are amongst the best performed stocks in the resources space.

A common but not absolute theme is that having an underpinning resource base is almost a secondary consideration. While most do have resources bases, they can also simply buy in lower value supplies, apply their processing technologies, and sell their product at value-added prices.

It’s a very different model to your standard mining or exploration company with a dig it up and ship it out focus.

It is all about the mineral processing technology involved and how it is being developed or tweaked to give the company involved a future as a high value-add producer of the finished or near-finished materials the world wants, with an overlay of security of supply.

Downstream believers

As indicated earlier, support for ASX-listed stocks going down that pathway is strong, with a bunch of stocks in the space now commanding big and/or growing market caps. Here are a few examples:

IperionX (ASX:IPX): It is now a $2.23 billion company on the strength of its titanium mineral-to-metal focus in the US.

Alpha HPA (ASX:A4N): Its focus on developing a high-purity alumina/aluminium products business has carried it to a market cap of $1.1 billion.

Novonix (ASX:NVX): A mix of high performance synthetic graphite anode materials, cathode materials and a R & D services arm has powered it to a $344m market cap.

Metallium (ASX:MTM): It is now a $457m company thanks to a technology that delivers benefits in rare earths processing and other critical metals.

Green Critical Minerals (ASX:GCM): An up-and-comer thanks to its very high density graphite technology keeping computer chips cool. Its market cap has grown to $75m.

Ready to fire

All of the above is by way of background to today’s real interest – Firebird Metals (ASX:FRB).

It is owned 9.5% by big picture guy Tolga Kumova and 9.7% by Canmax Technologies, a leading Chinese supplier to the lithium-ion battery industry and a recent investor in Aussie lithium producer Liontown (LTR).

Firebird wasn’t included in the above list because its $25.6m market cap at 18c a share suggests the market has yet to get behind its fast-emerging manganese-rich battery chemicals focus.

But Garimpeiro reckons greater recognition for the stock is around the corner so the next time he compiles a list of mineral processing technology companies, Firebird could well make an appearance.

Firebird owns the Oakover manganese project near Newman in Western Australia. It has a net present value on it of $741m which is interesting in itself.

But the real excitement with this one is its deep dive into manganese-rich battery chemistries through its disruptive and patented technology developed in China, and deployable worldwide.

The manganese Firebird needs can come from anywhere; it’s the technology and IP that counts as Firebird has hitched itself to rise of lithium manganese iron phosphate batteries (LMFP) for EVs and stationary storage.

There are two types of main battery cathode chemistries – a phosphate-based battery or LFP (lithium iron phosphate), or the more expensive nickel-based battery NCM chemistry (nickel cobalt manganese).

LFP has come to dominate the market in China in the last few years because it is much lower cost, and it has a much higher safety rating than the NCM alternative.

The one downside of LFP has been that it doesn’t give you the range and capacity that the nickel batteries do. But by adding manganese to make a LMFP battery the energy density is increased considerably and the low-cost and safety ratings are retained.

People who know about these things will tell you that demand for LMFP is on the verge of exploding as LFP makers begin the switch across to the superior chemistry. Soochow Securities for instance forecasts LMFP will replace 50% of LFP to become a $US20 billion market by 2030.

It’s why Firebird has put its Oakover resource to one side to pursue a future as a manganese chemicals play. The manganese ore market is about 25mtpa so there is no issue in securing the ore it needs for its value-add adventure, with Oakover sitting in the background for the long-term.

Chess or Chinese checkers?

Garimpeiro could go on about how Firebird reckons its cost of production of precursor LMFP materials will be the lowest anywhere – including China – thanks to the disruptive technology it employs.

But he is going to leave the final words on Firebird and its technology to Ken Hoffman, an American recently appointed as special advisor to the company. He was formerly the global head of Battery Metals at McKinsey & Co.

“The only way you can beat the Chinese is to come up with something new. Firebird has seemingly done so in terms of having a really good process to clean up manganese and then immediately turn it into the final product,’’ Hoffman told Garimpeiro.

“They seemingly have a technology that beats the Chinese at their own game.”

Now that is saying something.