Investors jumped the gun on battery metals, but demand is just taking off
The boss of one emerging manganese producer says investors got too excited too quickly over the battery metals thematic, but the rapidly growing demand is very real.
Manganese is a battery metal because it is used in making the cathode of a lithium-ion battery. The cathode is used to conduct electricity flows out of a battery or device.
“There was a huge enthusiasm for battery raw materials well in advance of the emergence of the real demand for these products,” Euro Manganese (ASX:EMN) CEO Marco Romero told Stockhead.
“I think there was an excessive exuberance … that then was followed by a disappointment.
“And ultimately, I believe market interest, valuation and investor interest should balance out.
“There probably will be other rushes, other ups and downs in the market over time, but there is no doubt that the fundamental demand for these products is on the increase and will be so for the foreseeable future.”
The proof is in the billions of dollars being spent by major carmakers, according to Mr Romero.
“Audi by 2025 expects one third of its cars to be electric,” he said.
“Today you’re just beginning to be able to buy Audi electric automobiles.
“You can imagine that in a period of six years, all of a sudden a third of the models being electric is quite a dramatic change.”
Check out this quirky Super Bowl ad by Audi:
Mercedes, meanwhile, was the first major carmaker outside of China to build its own battery plant.
German chemical giant BASF discovered late last year that by upping the amount of manganese and using much less nickel and cobalt it can slash the cost of an electric car battery by way more than half.
BASF is developing a battery chemistry that comprises 70 per cent manganese, 20 per cent nickel and less than 5 per cent cobalt.
Until recently the push by battery makers was for a chemistry make-up of 80 per cent nickel, 10 per cent manganese and 10 per cent cobalt.
The lithium ion battery market is forecast to increase by about 24 times in the next 20 years.
The primary cathode chemistry in 2040 will be nickel-manganese-cobalt and lithium-nickel-manganese oxide.
This will require more than 1 million tonnes of manganese metal equivalent.
Euro Manganese, which was the first company to dual list in Australia and Canada at the exact same time back in October, owns the rights to the largest manganese deposit in Europe.
The company is looking to build a larger-scale demonstration plant this year so it can start delivering large-scale multi-tonne samples of finished product to customers for testing and qualification.
A preliminary economic assessment released last week showed Euro Manganese’s Chvaletice project in the Czech Republic would have an after tax net present value (NPV) of $593m and internal rate of return (IRR) of 22.6 per cent.
The project would recycle 27 million tonnes of tailings material to produce 404,100 tonnes of high-purity electrolytic manganese metal and 2.35 million tonnes of high-purity manganese sulphate.
Cannacord Genuity recently initiated coverage of Euro Manganese and has placed a $1.10 share price target on the company, which today was trading at 26c.