When will ASX manganese stocks join the battery metals boom?
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Of all the critical metals set to benefit from the oncoming flood of demand for electric vehicles, none are expected to get a bigger bump than manganese.
According to BloombergNEF, manganese demand in lithium ion batteries will climb an astonishing 9.3 times between today and 2030.
While lithium equities are currently running hot, manganese has the biggest growth profile for any of the currently recognised battery metals.
The market for manganese sulphate, the kind of high purity product used in battery precursors, is already projected to be in a deficit as EV makers like Tesla bump out expensive and questionable cobalt supplies with higher manganese chemistries.
By 2024, BloombergNEF says prices are likely to rise high enough to support new refinery project to supply can meet demand, with prices already climbing 30% from US$867 per tonne at the start of 2021 to $1128/t by the middle of the year.
Right now manganese is mainly used as an alloy to reinforce and harden steel and, like iron ore and coking coal, the 50Mt seaborne trade in the metal has been driven this year by demand out of China.
“Steel is the dominant demand sector,” says Peter Allen, the managing director of manganese explorer Firebird Metals (ASX:FRB).
“Greater than 90% of all manganese is consumed in steel — I think technically like 94% — and in steel manganese is not substitutable.
“There’s no economic replacement for it, it gives steel its strength, its hardness, it’s a deoxidizing agent in the process.
“So, keeping that in mind, there’s a massive market for steel and steel fundamentals are pretty strong.”
Tolga Kumova-backed Firebird Metals owns the Oakover manganese project in northern WA.
Managing director Pete Allen has worked in marketing manganese for years, including stints with Woodie Woodie mine owner Consolidated Minerals, Element 25 and Gulf Manganese Corporation.
According to Allen there are two kinds of manganese now in the market, direct shipping ore destined for steel mills in China and processed high purity manganese sulphate heading into battery cathodes, where manganese is the “M” in the traditional NCM battery chemistry.
This end market is set to get bigger as EV makers look to replace potential conflict metals like cobalt from the supply chain and reduce costs to make vehicles more accessible for consumers.
Tesla and Volkswagen, one of the world’s largest automakers, have flagged shifts to higher manganese chemistries.
“People are looking now on cathode battery manufacturing to drive costs down to make batteries more accessible to the wider market,” Allen said.
“As Volkswagen announced a few months ago, they were looking at the base model for their gross market segment as a manganese rich battery, which will have more manganese and nickel in comparison to the manganese nickel cobalt standard battery today.
“So on the base level interest is being driven by EV manganese, manganese sulphate, batteries, people are forecasting significant exponential growth over the next 10 years.”
Manganese producers are enjoying solid margins this year due to record levels of steel demand in China.
Like in iron ore, the security of Australian supply and levels of demand from China has meant the commodity has avoided the impacts of trade tensions between the two countries.
Supplies from Australia have proven important given the long transit times and supply chain issues in other major suppliers like Brazil, Gabon and, in particular, South Africa.
“In terms of steel, the market is kind of balanced at the moment,” Allen said.
“But what you’re seeing is through South African supply chain and logistics, they suffer a lot with their power, a lot with their rail network.
“So that has certainly hamstrung the supply out of South Africa.
“And again the main steel markets are in Asia. Places like Australia are very well suited because of the quick transit times to markets and quick supply versus places like South America, South Africa where it’s a month or more to ship from the mines.”
Allen said on the battery side of the ledger, European automakers would be keen to get manganese sulphate out of Australia because of concerns about the concentration of that market in China.
Australian ore is important because it supplies the high grade segment of the market through the established Woodie Woodie and South32’s Groote Eylandt mine, while it is also an important replacement source for China’s waning domestic supplies.
“There is not enough latent capacity in the market to not buy out of Australia,” Allen said. “And especially with South32 and Woodie Woodie, it’s of such a high quality there’d be a very large hole in the high grade market if the Chinese were to stop supply from Australia because it’s been constrained for a long time.”
Oakover was drilled several years ago by Brumby Resources, outlining a JORC2012 compliant 64Mt resource at a grade of 10% manganese.
Over the years Brumby became Marindi Metals, which turned into Firefly Resources.
As it emerged as a successful gold explorer, eventually sealing a $45 million merger with Gascoyne Resources, Firefly spun Oakover out into Firebird Metals.
After listing in March Firebird began its maiden 11,500m drill program last week at Oakover, where it plans to have a pre-feasibility study ready for the market by the first quarter of 2022.
“The asset gives us the ability to sort of take a large step forward. We’ve been able to advance and progress the program on the basis that we’re not a Greenfields player,” Allen said.
“We’ve got the resource, we’ve got the understanding, and now we’re doing infill and extensional drilling to improve the confidence so we can look to convert the resource as part of our upcoming feasibility study, and also to expand the resource.
“On the ground up there there’s manganese everywhere, and we’re quite confident of expanding the resource, but obviously we have to go through the drill program.”
Archived diamond drill core from the Brumby Resources days will also be used to progress metallurgical test work.
That will help identify in the first instance the suitability of the manganese resource to be used in the steel industry and, further down the line, whether it has the required purity to be processed into battery grade precursor.
Allen said a new market has also emerged for lower grade manganese which is processed with simple methods like washing and screening and ore sorting to ship at 30-35%.
This has come about as a result of the closure of mines and downsizing of domestic production in China.
“10 years ago, where China got that product from was domestically, and what’s been happening over the last 10 years as the Chinese economy has been developing, the Chinese Government’s been looking into stricter requirements in occupational health and safety, on environmental policies,” Allen said.
“A lot of the old traditional Chinese mines were very lax in those regards.
“So you’ve seen a lot of Chinese production being stripped by the government and you’ve seen a lot getting lower grade and becoming less economic and deeper underground.
“So what’s happened is 10 years ago, they bought high grade materials to blend with their lower grade material. Then that became uneconomic and it stopped.”
That’s opened the door for Australian, and other, production to feed demand in the steel and construction sector.
“It’s the main market segment in steel construction. There’s a product called silica manganate that feeds into that, that only needs a 34% manganese content to be produced,” Allen said.
“Between low and mid 30s is an ideal feedstock for silicon manganese, which is feeding into the construction sector, so there is huge demand for those products.”
There is already a recent example of success in this area in Element 25 (ASX:E25), which recently opened its Butcherbird mine in the Pilbara.
BHP spinoff South32 is the world’s biggest manganese miner and operates the Groote Eylandt open pit mine in the Northern Territory.
At 5.8Mt in FY 2021 S32 supplies more than 10% of the seaborne market from its mines in South Africa and Australia and Groote Eylandt is the largest and lowest cost producer in the world.
ASX-listed Malaysian based OM Holdings runs the Bootu Creek mine in the Northern Territory, supplying its downstream smelting operations in China.
Bootu Creek shipped 228,829t of manganese ore at a grade of 28.79% in the June quarter, with OM Holdings planning to wrap up mining in 2021 before processing stockpiles.
Bryah Resources has just about every commodity under the sun across its Bryah Basin projects, and includes an impressive portfolio of manganese assets.
They include the Horseshoe South mine, once operated by Chris Ellison’s mining services, iron ore and lithium giant Mineral Resources (ASX:MIN), Brumby Creek and Black Hill prospects.
All three projects are now part of a JV which OM Holdings ihas farmed into for a 51% stake by putting $2 million into exploration, including mineral resource estimates across all three sites.
Brian Gilbertson’s Jupiter owns half of the Tshipi manganese mine in South Africa, which produced almost 3.5 million tonnes of manganese ore in 2020-21.
Early last year the miner released a concept study on ramping up production to 4.5Mt a year by 2023.
Jupiter is now 100 per cent focused on Tshipi and the manganese market after spinning out its WA iron ore assets into the Juno Minerals (ASX:JNO) float this year.
Element 25 sent the first shipment of high-quality manganese concentrate from its Butcherbird manganese mine near Newman in WA’s Pilbara region from the Utah Point facility on July 14.
Butcherbird will produce around 365,000t of manganese concentrate every year over its 40 year mine life under the first stage of operations.
But Element 25 is planning to expand that threefold in stage 2, before assessing plans to build processing infrastructure on site to make “zero carbon manganese” products for lithium ion batteries.
Euro Manganese owns the Chvaletice manganese project and is squarely focused on the emerging manganese battery market.
The company recently restarted its pilot plant at the project, where Euro Manganese would extract manganese rich tailings from a decommissioned mine and convert them into “ultra-high-purity” manganese products for the lithium ion batteries.
Euro Manganese is aiming to begin pilot operations next year ahead of an investment decision on starting a full scale commercial plant in 2024/25.
Gulf Manganese placed its incomplete Kupang manganese smelting hub in Indonesia on care and maintenance around a year ago to try lock up new funding for the project.
The smelters are approximately 60% complete with the main smelting components on site.
As of its last quarterly the company said it was in discussions with investors, and that it would take six to seven months from the restart of construction to commission the hub.