Monsters of Rock: Manganese makes its comeback as other commodities waver

Prices for high grade manganese are on the rise, zagging against the downward trend across metals in recent weeks
WA miner Element25 says new shipments from its Butcherbird mine in the Pilbara
Yancoal’s Chinese parent could pose an early policy conundrum for ALP Government with bid to take out ASX listed coal miner

Metals have looked shaky over the past month, but one bright spot has been the manganese market.

A commodity that seemed to miss 2021’s “shortage of everything boom”, manganese ore prices for high grade 44% plus material have lifted substantially from US$5.60/dmtu a few weeks ago to well over US$7/dmtu, with the Shanghai Metals Market this week assessing 46% Australian ore at 62-63RMB, upwards of US$9/dmtu.

That’s good news for Element25 (ASX:E25), a new manganese producer which has stumbled in the ramp up phase of its Butcherbird mine in the Pilbara, including a process plant outage last year.

The $100 million capped producer has suffered a 72% slide in its shares but was up more than 5% today after announcing higher contract prices for its shipments, which included a 35,002t load of special high silica manganese concentrate which left Port Hedland on May 24.

“The contract price received was higher than for previous shipments due to the buoyant prevailing manganese markets, which helped to offset the higher than forecast diesel and shipping costs which remain above long-term trends due to ongoing geopolitical and COVID related issues around the world,” the company said.

“Manganese ore markets have remained strong through Q2 2022 with 44% index material remaining well above US$7/dmtu CIF Tianjin.”

Another shipment containing 35-40,000t is expected to set sail by the end of June.

E25 is not the only manganese producer on the ASX to express confidence in the industry, particularly for higher grade product.

South32 (ASX:S32) boss Graham Kerr last week at BAML’s global mining, metals and steel conference indicated the major still sees manganese as a major component of its portfolio despite a stated strategy shift to base metals like copper and zinc.

“I think what you have seen in terms of supporting price over the last probably 12 to 18 months is a shift in China with rising energy costs, but also if you like some of the environmental regulations, you’ve seen much more of a focus on using higher grade materials,” he said.

“So people talk a lot about the stockpiles if you like that exist in China sitting on the ground.

“But if you break those stockpiles into the low, the mid and the high grade what you really see is the high grade turns over really quickly, the low and the mid grade not so quickly.”

South32 owns the high-grade GEMCO operation in the Northern Territory, described by Kerr as “the best asset in the industry”, as well as South Africa’s best high grade asset the Wessels mine, where he said South32 is looking to double capacity.

It also owns the lower grade but large scale Mamatwan, where South32 shares a boundary with fellow ASX-listed manganese miner Jupiter Mines (ASX:JMS) and its Tshipi Borwa mine.

While manganese is primarily used in steelmaking, Kerr says it could see increased take-up from battery makers looking to displace high costs cobalt and nickel while maintaining energy density in nickel-cobalt-manganese lithium-ion batteries.

“The other thing that’s slowly developing, there is a real push again in the battery technology to replace cobalt and manganese if you think about what it brings in terms of energy density value is certainly moving up if you like,” Kerr said.

Manganese producers share prices today:

Thorny test for new PM as Chinese parent aims to swallow Yancoal whole

China is the word on everyone’s lips right now as new PM Anthony Albanese mulls how he can improve Australia’s trade relationship with the Asian economic powerhouse while fighting back against its expansionary foreign policy plans.

The business world could hand him and new Labor Treasurer Jim Chalmers a slippery little political football to grip onto after ASX-listed coal giant Yancoal (ASX:YAL) entered a trading halt to mull an offer from its Hong Kong-listed parent company Yankuang Energy to take it out.

Yankuang told the Hong Kong Stock Exchange it plans to offer convertible bonds for US$3.60 a share to minority Yancoal shareholders, up to a total US$1.794 billion ($2.54 billion), though that is 16.2% below Yancoal’s current share price of $6.08.

The ASX-listed coal miner is up some 190% over the past 12 months.

Yankuang already owns more than 62% of Yancoal, which swung from a $1.04 billion loss to a $791m profit in 2021, a mark it has bested only once in the past five years back in 2018.

That came off the back of soaring met and thermal coal prices. Energy coal was fetching US$400/t this morning, while premium coking coal was above US$500/t.

$8b capped Yancoal is now Australia’s largest pure play coal miner with production of 63.2Mt (on a 100% basis) in 2021. Only global supermajors Glencore and BHP (ASX:BHP) are more prolific exporters.

Outside of Yankuang, other major shareholders included Cinda International (15.89%), Glencore (6.4%) and China Shandong Investment Limited (5.41%).

If they are onside Yankuang will likely hit the 90% threshold needed for compulsory acquisition given just 10.04% of the company is held by small minority holders. But a foreign investment review board approval process could yet stymie the bid, with Chalmers needed to sign off on any deal.